Creating Corporate Scorecards

Creating Corporate Scorecards

By Marco Singh, Commercial Finance Director at Ensono

Kaplan and Norton’s Balanced Scorecard is a familiar concept, still widely used today, often falling to FP&A or Strategic Planning teams to create and then monitor. This process can be very challenging and problematic to deliver. This blog focuses on some practical observations and tips regarding the implementation of a scorecard, designed to help you get buy-in from the rest of the organisation.

Split into two parts, it covers the value of having a proactive communications approach together with a constant focus on measurement & monitoring implications. 

1. Communications

Get in early

The scorecard is going to be driven by the business strategy and if you don’t agree or understand the strategy then you are already on the back foot (and probably the rest of the organisation are likely to struggle as well). So rather than waiting until it is too late to influence the strategy, try to become involved at the very start. 

There may be a few raised eyebrows at your presence during strategy sessions but it’s worth it as you ensure you are brought into the outcome and are able to communicate it to everyone else.

Co-opt the Exec

Towards the top of most lists as to why projects fail is a lack of senior management/ leadership commitment. With that in mind you should try to convince the CEO/MD/Exec to assist you in explaining the business strategy, the associated KPIs and the targets. It may not be a role they are accustomed to and so you can help by providing some tailored talking points for each of them.

If you get push back, you know you probably have a bigger problem than just the scorecard…

Tell a story

The medium of storytelling is a powerful one, and should be part of the process of communicating the outcome of a scorecard process. Death by PowerPoint and lists of KPIs & targets are never going to be enough to explain ‘how’ and ‘why’ an organisation is heading in a certain direction. Therefore, whilst probably out of most people’s comfort zone, time spent on learning how to become a good storyteller is time well spent.

2. What to measure – Know the limits

In terms of what to measure, Kaplan and Norton’s four areas: Financial, Customer, Internal Processes and Learning & Growth are a good place to start. However, a few words of caution.

  • Know the limits of your systems: It’s no use creating brilliant KPIs that your systems do not capture. Best to be highly pragmatic about the system capabilities at your disposal and focus on the art of the possible. E.g. No point focusing on product profitability if invoicing is on a bundled basis per customer.
  • Know the limits of an organization's resources: It’s no use creating brilliant KPIs that require substantial manual calculations that paralyse certain teams every month end. Not only that, but teams overloaded with the delivery of KPIs will deeply resent the task and are unlikely to provide impartial advice on how to improve things in the future. Again, pragmatism is key here. Some manual KPIs are fine, but when they become the majority you probably are going to put a resource strain on the organisation.
  • Know the limits of your bandwidth: Best practice tells us that scorecards should be cascaded down the organisation across geographies, divisions and departments. However, there is going to be a limit as to what you or your team can verify and monitor. There is also a danger that interdependencies across team scorecards lead to unintended conflicts and complexity – something you may have no bandwidth to deal with.

Concluding takeaways – be bold, but be pragmatic

In terms of ensuring a scorecard is properly communicated it pays for FP&A or Strategic Planning teams to be bold. Be bold in getting a seat at the table and be bold in ensuring senior managers are on board with a story that resonates. 

Also, it can take a brave person to push back (usually upwards) on scorecard KPIs because of system and resource issues, or because there are too many of them – it’s a message that oftentimes people don’t want to hear.  However, it’s only by being highly pragmatic that you can ensure you have a scorecard that contains accurate, verifiable measures that can be reported on a timely basis without undue effort.  

The article was first published in Unit 4 Prevero Blog

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