Strategy Maps and the BSC

Transcription

1 Strategy Maps and the BSC The Big Idea It s a major challenge for any organisation to develop and successfully deliver a strategy that is integrated across all of its systems and processes. It s further complicated for non-profits because success is not judged on income alone. Other factors kick in like how well the organisation is serving its beneficiaries or cause, which is usually dependent on a range of factors and is much harder to measure. The Strategy Map and complementary Balanced Scorecard are planning tools created by US academics Norton and Kaplan to address this challenge of integration. They are useful because they express strategy in a simple to understand format while still reflecting the complexity of an organisation s different activities and stakeholder relationships.they also ensure that a strategy is not just developed but implemented and tracked using a single, logical framework. The strategy map and balanced scorecard we ll call them BSC for short after this start with a one-page diagram showing the fundamental logic for the strategy. A second page then shows the implications for internal and external stakeholders and how the success of the strategy will be measured and tracked. If necessary, a further operational plan, in the form of a Gantt chart or similar, can show the timeline and the specific tasks that need be carried out to deliver the strategy. So the BSC approach allows you to formulate and express your strategy in two main pages, making it easy to communicate and understand. Though you should note that the preparatory work can still take as long as the development of a more conventional strategy simple is not the same as quick and easy. An additional implementation plan can help break your BSC down into more detail at an operational level and show how it will be delivered over time. The Management Centre (2011). This download may not be reproduced without permission of the authors. 1

2 Strategy Maps are attractive also since they re seen as a more contemporary way of sharing your ideas with donors and partners and even beneficiaries. Origins The original Balanced Scorecard methodology was developed by two U.S. academics, Robert Kaplan and David Norton. In 1990, the Nolan Norton Institute, the research arm of KPMG, sponsored a year-long research project on 12 companies and their performance measurement approaches. This was based on the idea that over-reliance on financial measures such as return on investment was resulting in less strategic, long-term decision-making. The theory was that a new model was needed to balance tangible financial results with other important operational elements such as customer satisfaction and staff engagement. David Norton, CEO of Nolan Norton, served as the study leader, and Robert Kaplan as an academic consultant. Through the study, Norton and Kaplan developed the Balanced Scorecard as an innovative solution to the complexities of strategy development and performance management. They introduced the concept in three Harvard Business Review articles in The publication later referred to the Balanced Scorecard as one of the most influential management ideas in the past 75 years. In 1996, a book detailing the system, The Balanced Scorecard: Translating Strategy into Action, was published. The original model looked like the diagram below. This took four perspectives and tracked what was important in each one. It focused on measuring success in four key areas: Customers Finance Business processes Learning and growth "#$%$&#%'!!!"#$!"#$%&&''(#)*+*&,+--./# 0"1#$0"%-(#1'#+22'+3# 4"#"%3#$4+5'0"-('3$6# 53%6+4.'7+-*!!"#+&0,'<'#"%3#<,$,"*/#0"1# $0"%-(#1'#+22'+3#4"#"%3# $4+5'0"-('3$6# 8#*#.$!1! 53-%3+09! /+%-$#$0!1!0-.234! ()*#$+**!,-.&+**+*!!"#$+7$8.#"%3#$4+5'0"-('3$/# 10+4#9%$,*'$$#23"&'$$'$#:%$4# 1'#';&'-#+46#!"#+&0,'<'#"%3#<,$,"*/#0"1#1,--# 1'#$%$4+,*#"%3#+9,-,4.#4"#&0+*='# +*(#,:23"<'6# =mc The challenge here was that the four perspectives were balanced but not linked. So this original model has subsequently been developed into a map approach see below to illustrate the more dynamic and interactive nature of strategy. Many of the world s most famous companies now use this approach, including over 50% of the FTSE 100. The Management Centre (2011). This download may not be reproduced without permission of the authors. 2

3 =mc has helped charities and INGOs including the Federation of the Red Cross and Red Crescent Societies, WSPA, Action Aid, Amnesty International and Sight Savers to use it for a range of activities including fundraising and strategic planning. How to make a BSC Developing a BSC can take 18 months and may involve a number of stages. These are outlined below:!"#"$%&'()*+,(( #+%$+"-)&(&,*+".+(!"#$%&'"#(()*+*,' +*'$")'-./01'-)'.()/#$)'+*2' /*$01#)#($*2( &,*+".+(&03#+"%( 3.-'1.)&'$"#$' /)0#$)'$.'.4/' ()/5./6#*7)2' 42"*56&$5,*(,7(2%)8"%#( 9"8"0,:(;$:<( =&,%"&$%2<(>0$*(!"#$'#/)'$")'8)9' +&&4)&'$"#$'-)' "#:)'$.'#11/)&&2'!"#$'&".401'-)' 1.'$.'+6(/.:)' ()/5./6#*7)2' So as you can see above, the map and scorecard comes about as the end result of a number of stages. This download concentrates on the structure of the map itself- to find out about the stages, and especially the creation of drivers, call us As you can see from the diagram above, to formulate your map, you use analysis of your stratgic context and what that tells you about performance to create a set of drivers or key internal and external issues. These drivers then help you create a number of objectives organised around a linked set of perspectives. And the scorecard, in turn, helps measure how successful you are at achieving the objectives. The end result looks like this and typically has these elements: The Management Centre (2011). This download may not be reproduced without permission of the authors. 3

4 !"#$"%&'()$*(%+%)%,"-( perspectives: a way of looking at, aligning, the key elements in your business model objectives: the key elements linking the business model How? Why? logic arrows: showing how the objectives link owner: The individual or team who are responsible for the objective As shown above, the map follows a clear how (working from the top down) and why (working from the bottom up) logic, which links all of its components. To create the map, you start with the top perspective, e.g. how will we achieve our goals for our beneficiaries? and work your way down, aiming to only list 2-4 objectives for each perspective to focus on the most critical. You should then be able to work your way back from the bottom up (e.g. why do we need to invest in our growth?). The process should include the following: agree the perspectives: there are normally four including donors, internal processes, learning and growth and resources/finance but there are other possibilities. begin with the top perspective in a non-profit setting, you would normally use beneficiaries/customers/stakeholders as this top level. brainstorm all the possible objectives you might choose, writing each one on a post-it note and placing it on flipchart paper. when you ve exhausted all possibilities, cluster the objectives into groups, eliminating those you think are less important or combining those which are essentially the same. write new objectives for each cluster or re-draft the existing ones incorporating any changes that arise from seeing them all together. The Management Centre (2011). This download may not be reproduced without permission of the authors. 4

5 The finished strategy map clarifies and communicates the strategy to staff, donors and other stakeholders in a simple, but not simplistic, way. When you reach this point, you should be able to follow the how/why logic like this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argets and Initiatives The next stage is to make the complementary Scorecard, which takes the objectives in the strategy map and expands on them. You do this by setting one or two indicators (measures of success) for each objective and establishing linked targets for each of them. Objectives Indicators Targets Initiatives What do we need to achieve? How will we measure success? How much do we need to improve? What do we need to do to get there? Finally, you identify a set of initiatives or activities that will help deliver the objectives as measured by the indicators. Often at this stage, organisations assign ownership of strategy map objectives to senior team members. Each objective owner then has the responsibility for: The Management Centre (2011). This download may not be reproduced without permission of the authors. 5

6 writing a paragraph that explains the meaning and implications of each objective and why they own it organising specialists or relevant stakeholders to set indicators, identify baseline data and propose targets (it is impossible to set a realistic target for the future without establishing the starting point) bringing this information back to the senior team for approval and to ensure the indicators and targets are in sync Balanced Scorecard specialists suggest that most private sector organisations already collect 70% of the data needed by indicators. Our experience is that most not-for-profit organisations are only collecting around 30% of data they need. By implication the choice of indicators should be pragmatic. Otherwise you may find yourself struggling to organise data collection a key question is are you already collecting data on something that can be used as a BSC indicator? An indicator defines what will be measured to assess achievement of an objective. A target defines how much improvement is required over time. Only one or two indicators should be set for each objective. This keeps data collection manageable and the focus strategic. Every objective should have a lag indicator. Lag indicators look back over time and ask are we achieving the objective? For some objectives it may be difficult, or take time, to measure achievement directly. They will also need a lead indicator. Lead indicators ask are we doing the things we think we need to do to achieve the objective? In other words, lead indicators drive performance; lag indicators measure outcome. The final stage is an operational plan or Gantt chart to break it down further into tasks and show the timeline for delivery. Need some other fundraising Big Ideas? Welcome to another Big Idea download from =mc. These downloads are designed to share with you some of the classic and contemporary techniques we re using to help transform the results of major charities in the UK and internationally. Collect the set! Even if you don t want or need the Balanced Scorecard Model, why not let =mc help unlock your fundraising potential? =mc has a team of unrivalled fundraising consultants able to assist with the biggest and smallest campaigns. Between us we share experience in large charity work, international development, arts and culture, disability and the The Management Centre (2011). This download may not be reproduced without permission of the authors. 6

7 environment. =mc consultants have worked with many of the world s major charities on their strategy or fundraising. We re proud to be helping or have helped Oxfam, UNICEF, the World Health Organisation, the Federation of Red Cross and Red Crescent Societies, Greenpeace International, WWF, Concern Worldwide and Amnesty International. In the UK, we ve worked with Imperial War Museum, Alzheimer s Society, Oxford University, Care, WWF, Science Museum and the National Trust for Scotland. To find out how we ve helped these organisations achieve their big ideas and how we could help you call Angela Cluff, Director on Alternatively you can us at a.cluff@managementcentre.co.uk or go to our website at managementcentre.co.uk/fundraising. Or even visit our international website at managementcentre.com. The Management Centre (2011). This download may not be reproduced without permission of the authors. 7