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"A Tool for Translating Strategy into Action"
While strategies which have been effectively implemented bring their organizations success, unsuccessful ones can be a recipe for failure. In other words, having a strategy is no longer considered as a guarantee for success. Two major factors are critical in determining company success:
- Effectively formulated strategies
- Effective implementation of strategies
Companies that succeed in making this “strategic translation” into their measurement system are far better able to execute their strategies because they can better communicate their directions, focus on the critical drivers and align their investments and actions.
The improvement of the effectiveness of companies’ strategic management process will be maintained by eliminating the disconnection between the formulation of strategy and its effective implementation throughout the organization. The key issues identified for the disconnection are:
- A clear strategic vision is simply not enough - organizational struggle to translate the vision into action is essential. Even where companies have an effective strategic plan, it typically has a little or no impact on the operating goals of departments and individuals;
- Companies do not collect the right information to monitor progress toward their strategic goals; many do not identify or learn from their mistakes;
- Lack of transformation of strategic formulation into a continuous process that adapts to performance feedback on the achievement of strategic goals.
The Balanced Scorecard is a solution in the form of a new management and measurement system and ARGE is implementing this method with her international strategic partner 2GC Active Management *.
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Please click to enlarge
Balanced Scorecard Diagram
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The Balanced Scorecard is a proven approach to strategic management that imbeds the long-term strategy into the management system through the mechanism of measurement.
The Balanced Scorecard translates vision and strategy into a tool that effectively communicates strategic intent, and motivates and tracks performance against the established goals.
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A vision describes the ultimate goal - to be the best. A strategy is a shared understanding about how that goal is to be reached. The Balanced Scorecard provides a medium to translate the vision into a clear set of objectives. These objectives are then further translated into a system of performance measurements that effectively communicate a powerful, forward-looking, strategic focus for the entire organization.
In contrast to traditional, financially based measurement systems, the Balanced Scorecard solidifies an organization's focus on future success by setting objectives and measuring performance from four distinct perspectives. The Learning & Growth perspective directs attention to the basis of all future success - the organization's people and infrastructure. Adequate investment in these areas is critical to all long term success. The development of a true learning organization supports success in the next Balanced Scorecard perspective, the Internal perspective. The Internal perspective focuses attention on the performance of the key internal processes which drive the business. Improvement in internal processes now is a key lead indicator of financial success in the future.
However, in order to translate superior processes into financial success, companies must first please their customers. The Customer perspective considers the business through the eyes of a customer, so that the organization retains a careful focus on customer needs and satisfaction. Finally, The Financial perspective measures the ultimate results that the business provides to its shareholders. Together, these four perspectives provide a balanced view of the prese nt and future performance of the business.
Balanced Scorecard is used to:
- Clarify and update strategy;
- Communicate strategy through the company;
- Align unit and individual goals with the strategy;
- Link strategic objectives to long-term targets and annual budgets ;
- Identify and align strategic initiatives;
- Conduct periodic performance reviews to learn about and improve strategy.
Balanced Scorecard translates an organization’s mission and vision into a comprehensive set of performance measures that provide the framework for a strategic measurement and management system.
* 2GC Active Management www.2gc.co.uk is an experienced and established management consultancy that specialises in the design and implementation of performance measurement systems and in the evaluation of the strengths and weaknesses of existing systems.
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