We at AII Data Processing have always been dedicated to implementing and communicating our corporate strategy. Like many other companies worldwide, we have faced the challenge of translating strategy into operational terms. Various studies have indicated that 70% to 90% of organisations fail to realise success from their strategies.

“One of the immediate effects of working on our Strategy Map was the alignment of our business processes with the corporate strategy. For me as a CEO, the biggest benefit of a functioning Balanced Scorecard in our company, is the ability to monitor, at any given moment, the status of our strategy implementation.”     
Ilia Krustev, CEO AII Data Processing

Successful execution of strategy requires three components:

The philosophy of the three components is simple:
• You can’t manage what you can’t measure
• You can’t measure what you can’t describe

The Balanced Scorecard has emerged as a proven and effective tool in the quest to capture, describe, and translate intangible assets into real value for all of an organisation’s stakeholders, and in the process allow companies to successfully implement differentiating strategies. Developed by Robert Kaplan and David Norton, this methodology translates an organisation’s strategy into performance objectives, measures, targets, and initiatives in four balanced perspectives: Financial, Customer, Internal Processes, and Learning and Growth.

Using Kaplan and Norton’s concepts of Balanced Scorecard and Strategy Maps, the above equation can be rewritten as:
Breakthrough results = Strategy Maps +
Balanced Scorecard + Strategy-Focused Organisation
The five management principles to become strategy-focused are:

• Translate strategy to operational terms
• Align the organisation to the strategy
• Make strategy everyone’s everyday job
• Make strategy a continual process
• Mobilise change through executive leadership

What sets the Balanced Scorecard apart is the concept of cause and effect linkages. A well-structured Scorecard will tell the story of an organisation’s strategy through a series of linked performance measures weaving through the four perspectives. Objectives should be linked in cause-and-effect relationships. The strategy comes to life through the interplay and interdependencies among the financial and non-financial measures.

Financial Perspective
The measures in this perspective tell us whether our strategy execution, which is detailed through measures chosen in the other perspectives, is leading to improved bottom-line results. We could focus all of our energy and capabilities on improving customer satisfaction, quality, on-time delivery, or any number of things, but without an indication of their effect on the organisation’s financial returns they are of limited value.

Customer Perspective
When choosing measures for the Customer perspective of the Scorecard, organisations must answer two critical questions: Who are our target customers? and What is our value proposition in serving them? Here belong goals related to customer satisfaction, customer base retention and new client acquisition, as well as market share in target segments.

Internal Process Perspective
In the Internal Process perspective of the Scorecard, we identify the key processes the firm must excel at in order to continue adding value for customers and, ultimately, shareholders. Each of the customer disciplines outlined above will entail the efficient operation of specific internal processes in order to serve the firm’s customers and fulfil the company’s value proposition.

Learning and Growth Perspective
The measures in the Learning and Growth perspective of the Balanced Scorecard are the enablers of the other three perspectives. Essentially, they are the foundation on which this entire house of a Balanced Scorecard is built. Once we identify measures and related initiatives in our Customer and Internal Process perspectives, we can be certain of discovering some gaps between our current organisational infrastructure of employee skills and information systems, and the level necessary to achieve our results.

The Strategy

The concept of balance is central to this system, specifically relating to three areas:

• Balance between financial and nonfinancial indicators of success. The Balanced Scorecard was originally conceived to overcome the deficiencies of a reliance on financial measures of performance by balancing them with the drivers of future performance.
• Balance between internal and external constituents of the organisation. Shareholders and customers represent the external constituents expressed in the Balanced Scorecard while employees and internal processes represent internal constituents. The Balanced Scorecard recognises the importance of balancing the occasionally contradictory needs of all these groups in effectively implementing strategy.
• Balance between lag and lead indicators of performance. Lag indicators generally represent past performance. Typical examples might include customer satisfaction or revenue. Although these measures are usually quite objective and accessible, they normally lack any predictive power. Lead indicators are the performance drivers that lead to the achievement of the lag indicators. They often include the measurement of processes and activities. A Scorecard should include a mix of lead and lag indicators.

Benefits of implementing the Balanced Scorecard at AII Data Processing:

• Reviewing and updating the company’s strategic objectives and the roadmap of achieving them
• Aligning all business processes from the highest to the lowest level with the firm’s strategy thereby ensuring that all resources are focused on value creation
• Providing strategic value in all of the Balanced Scorecard perspectives – Financial, Customer, Internal Processes, and Learning and Growth
• Calculating the value of intangible assets like employee engagement and technology and correlate those measures with tangible information from across the company
• Identifying the root causes of potential problems well in advance
• Supporting the quality standard ISO 9001.

The text uses excerpts from the books Strategy Maps: Converting Intangible Assets into Tangible Outcomes by Robert S. Kaplan and David P. Norton, and Balanced Scorecard Step-by-Step. Maximizing Performance and Maintaining Results by Paul R. Niven.

AII Data Processing Team will be happy to share the knowledge and experience in implementing the Balanced Scorecard with you. Please, contact us at: team@aiidatapro.com.