Durch Irv Beiman

Mehr als Hälfte der größten Organisationen in der Welt haben angefangen, ausgeglichene Scorecards zu verwenden, um die Weise zu verbessern, die sie ihr Geschäft organisieren. Im ersten einer zweiteiligen Reihe im China Personal, besprechen Irv Beiman und die Yongling Sonne von eGate Shanghai beraten, wie die ausgeglichene Scorecardmethodenlehre an den Arbeitsplätzen in China angewendet werden kann.

Fremde investierte Unternehmen stellen schnell zunehmenden Wettbewerb in China gegenüber. Unternehmerische chinesische Firmen erlernen schnell, haben eine Unterseite der niedrigeren Kosten und haben normalerweise besseres guanxi im China Markt. Was ist Ihre Strategie für Erfolg in China? Wie konkurrieren Sie? Warum sollte Ihr Marktkauf von Ihnen?

Während China fortfährt, ökonomisch zu wachsen, wird strategisches Management für Organisationen in China in zunehmendem Maße wichtig. Chinesische Hauptleiter und Manager sind für das Lernen durstig über, wie man erfolgreich in Inlandmarkt und globalen konkurriert. Zunehmender Wettbewerb regt ihren Durst für das Lernen an, wie man strategisch wirkungsvolle Organisationen entwickelt. Diese Bedingungen haben eine freie Notwendigkeit an einer systematischen Annäherung zur Formulierung, zur Durchführung und zur Justage der organisatorischen Strategie in China verursacht.

Während der vorherigen Dekade ist eine systematische Methodenlehre für strategisches Management innerhalb der globalen Organisationen aufgetaucht. Es gebraucht ein neues und die erfinderische Annäherung, genannt „glich Scorecard aus (BSC). Mehr als Hälfte der größten Organisationen in der Welt haben angefangen, diese Annäherung zu verwenden, um die Definition und die Durchführung ihrer Strategien zu verbessern.

Die BSC wurde ursprünglich 1992 vom Universität- Harvardprofessor Robert Kaplan und Berater David Norton entwickelt. Kaplan and Norton’s use of the BSC has continued to evolve as they contribute to their client organisations, and continue to learn from those same clients. They have made a breakthrough contribution to the field of management in general, and specifically to the field of strategic management.

BSC methodology in China
Our experience suggests that BSC implementation success in China requires a more comprehensive approach than what is typically the case in western countries. Because of this, rather than referring to the “balanced scorecard”, we instead refer to the “balanced scorecard methodology”. We hope this article will be useful to those companies that are considering launching such an initiative.

In the first of our two articles, we outline the major steps or stages involved in a comprehensive implementation of the BSC methodology. Next month, we will outline six success factors for implementation of BSC methodology in organisations in China.

Timing
A typical question we have been asked is how long it takes to implement a BSC. Going through the process to design and Implement Company and departmental scorecards for the first time usually takes three to six months, depending on the time and people allocated for the project. This can include linkage to competency development and HR systems, as well as deployment of an IT solution. The timing can vary further according to the size of the company and the number of organisational levels for which BSCs are defined.

It is important to note that maintaining the scorecards is critically important after a BSC system is established. Most companies update their BSCs on an annual basis, usually during the last quarter of the year, just after or during their budgeting process. If there are significant changes in market, business, or internal conditions, BSCs should be adjusted in a more timely manner, rather than waiting for annual review. We have learned that companies in China need to become more flexible in their goal setting process to enable them to adapt more quickly to change. The BSC methodology is not just another version of annual goal setting for performance appraisal. It is a mistake to use it in this manner.

Getting started
Launching a BSC initiative requires senior management’s support and involvement. We usually recommend to our clients they form an Executive Committee (EC) composed of the top/senior management team. The CEO, GM, or leader of a profit centre should be appointed as the BSC champion. The EC’s goal is to ensure successful BSC implementation. Its responsibility is to analyze and reach agreement on the company’s business strategy, as well as approve company and departmental goals.

In smaller companies, the EC also serves as the BSC project team for implementation. In larger companies, a separate project team is usually formed for implementation. The project team’s responsibility is to coordinate implementation activities and monitor progress of the BSC project. This team usually consists of representatives from HR, IT, and other key departments. In larger companies, an HR manager or professional is sometimes appointed as the project team leader (or coordinator). Desirable characteristics for the project team leader or coordinator include the following: sets high standards; believes the company can improve; embraces change; able to effectively sell the benefits of the BSC initiative; able to tactfully push the project; coordinates team activities, and wants to play an important role in an initiative that will have beneficial long-term impact on the company’s success.

Our China adaptation of the BSC methodology is illustrated in Figure 1: BSC Methodology Implementation.

Figure 1: BSC Methodology Implementation

Stage 1: Analysis
Companies in China face multiple external and internal challenges to creating business success. The external challenges include: rapidly changing business conditions; increasing competition; and increasing customer expectations. The key challenge for senior management is how to compete in this dynamic and competitive business environment. The EC and Project Team work to formulate clear company business strategies based on thorough analyses. The process can include several areas for analysis, discussion and agreement by senior management, such as:

- Analysis of the business life cycle
- SWOT analysis - covering strengths, weaknesses, opportunities and threats
- Value proposition to target markets.

In our work in China, especially with private and state-owned companies, we have discovered that many organisations have not gone through this kind of systematic analytical process before. Some of these companies have been successful based on their intuition and entrepreneurial drive. Others may have been successful because of prior market dominance that is now eroding. As China’s situation evolves and competition intensifies, an exclusively intuitive approach is less likely to ensure long-term success. The analytical process in this stage is highly beneficial for such companies. It enables them to experience, sometimes for the first time, a systematic approach toward strategic analysis. This is learning that executives, managers and HR professionals, can use for the remainder of their careers.

Stage 2: Strategy Formulation/Clarification
The BSC project team should clarify the company’s vision, mission and business strategy based on their analyses as part of Stage 1. This can be accomplished through strategy workshops or meetings. One of the keys to business success is formulating a winning value proposition to key customers or target markets. Strategy is about choice. A company that tries to be everything to everyone will likely fail to meet anyone’s expectations.

Most companies will benefit from choosing the market segment or segments for whom their value proposition can be an effective differentiator. The BSC project team needs to generate a clear answer to the question from customers: “Why should I buy from you, rather than from your competition?” The BSC project team needs to consider in which of three areas should their company excel - product leadership, operational excellence, or customer intimacy. These three different value propositions often lead to different strategic objectives, depending upon the type of enterprise and where the company is in the business cycle.

The more successful companies often meet customer requirements in two of these areas, while truly excelling in one of them. The BSC project team needs to define what their strategic focuses will be in the next one to three years based on their value proposition.

Stage 3: Defining Company Objectives
After defining or clarifying the company’s mission, vision and strategy, the BSC project team then works on developing the company’s strategic performance objectives, usually in four key ares – finance, customer, process, and learning and growth. The project team should link the company’s business strategy to the company BSC in two ways:

1. Through the use of financial and non-financial objectives

2. Through the inclusion of leading and lagging measures of performance.

Kaplan and Norton consistently criticise over-reliance on short term financial measures for evaluating a company’s performance or potential for future business success. They distinguish between the issue of valuing a company’s tangible assets and the issue of creating value within the company from intangible assets. The intangible assets include knowledge, capability, customer loyalty, brand image, and a host of other variables important for business success.

The BSC methodology includes a tool for senior management to define their strategy for success. It is a diagram of the key elements of the company’s strategy. Kaplan and Norton call this diagram a Strategy Map. “Strategy maps provide a visual representation of a company’s critical objectives and the crucial relationships among them that drive organisational performance,” according to Kaplan and Norton.

Strategy map diagrams and charts can include objectives, target markets, value propositions, critical internal processes, key competencies and more. These charts and diagrams map the hypothesized relationships among the critical variables that describe the company’s strategy and how to implement it. They illustrate the hypothesized cause-and-effect linkages between financial and non-financial objectives. They can also illustrate the hypothesized cause-and-effect linkages between outcome measures (lagging indicators) and the performance drivers (leading indicators) for those measures.

We encourage BSC project teams to use strategy maps when developing their BSCs. The strategy maps can be designed to illustrate senior management’s hypotheses about the cause-and-effect relationships that exist among the key elements of the company’s business strategy. The BSC project team should define specific measures, targets, and initiatives for achieving key objectives. Eventually tasks should be defined for each initiative. These tasks should be tracked to assure the initiative is executed properly. This can be a key element of strategy execution that is enabled by BSC software.

Stage 4: Cascading Objectives
The BSC project team is responsible for communicating the strategy throughout the organisation, and cascading performance objectives to lower levels of the organisational hierarchy, potentially down to individuals. In cascading the company BSC to lower levels of the organisation, it is important to focus on the issue of creating organisational alignment. Designing the company’s structure, systems and processes so they fit well together and with the company’s strategy is critically important for strategy execution.

Each division or department should first consider the company strategy, objectives, measures and targets, and then cascade company goals to their own BSC. Each unit should also incorporate their internal customers’ needs into their BSC in order to improve horizontal alignment.

The EC/Project Team should also consider issues such as organisational silos, job descriptions, and performance appraisals. Senior management should avoid treating the BSC project as a human resource initiative under the exclusive responsibility of the HR department. These are potential hindrances or barriers to establishing organisational alignment and achieving successful strategy execution. Performance appraisal systems in China are particularly susceptible to the undesirable influence of organisational silos. If job descriptions are developed from the “bottom up”, they can often hinder strategy execution.

Stage 5: Linkage to HR and IT Systems
The BSC project team should consider linking the BSC performance management system to competency development. This enables employees to focus not only on their BSC goals, but also on competencies that may be critical for strategy execution, such as teamwork and communication. A company’s core competencies (including management competencies) should be selected based on the company’s business strategy, core values and culture. Examples of core management competencies include: strategic management, problem solving, team leadership, and coaching.

The BSC system should be linked to variable pay in order to motivate all employees to work together to achieve the company’s strategic goals. When designing the variable pay component, it is important to consider the relative importance and priority of objectives in each perspective and at each level of the organisational structure. The decisions made about relative importance and priorities communicate clear messages to all managers and employees.

In implementing the BSC system, our experience suggests that companies in the PRC may encounter several challenges:

1. Some measurement data may not be readily available. Although designated measurement owners may record the data, this information is likely scattered, with no single system for displaying all BSC information. ERP systems usually have data in the financial and operational area, but are less likely to include data in the customer and learning/growth perspectives.

2. HR management and staff must spend time to gather BSC data from multiple sources, then organise this information for reports to top management.

3. Managers may need to manually record objective BSC data for employee evaluations. There may be no IT system to record and sort this information.

4. HR professionals or managers must manually calculate performance scores and bonuses.

5. BSC Performance management can become a burden to HR professionals and managers instead of being a tool to help the company improve efficiency and business results.

Some large state-owned enterprises and multinational companies in China have implemented a BSC system, but are not able to easily track, analyse, and adjust performance objectives. Because of this, they have stopped using the BSC system, and the implementation has failed. A successful BSC implementation should include use of an information system that enables top management to easily track company performance and adjust strategy in a timely manner to achieve company goals.

Stage 6: Linkage to BPI/BPR
In order to achieve BSC goals, most Chinese organisations will need to redesign and/or continuously improve key business processes. This includes the structuring, training and deployment of cross functional “business process reengineering” (BPR) teams for iterative process improvement or more comprehensive process redesign. Considering the limited resources of most companies, a key strategic issue is which processes to focus on first. Where should a company’s limited resources be used? The BSC methodology provides a clear answer to this question. The focus should be on those processes that are most importantly related to the company’s business strategy.

The most common source for process improvement targets is in the company and department or sub-unit BSC process perspectives. BSCs at the company and department or sub-unit level provide clarity about which process areas are important strategically. So there are two primary sources of BSC process improvement projects: [1] objectives from the process perspective in company and subunit BSCs; and [2] initiatives that would benefit from process analysis and improvement or redesign.

Comparisons of future process performance targets with what the company has previously achieved will reveal the degree of improvement that is required. In some cases, process improvement can be approached incrementally. In other cases, the project team may need to redesign the process completely.

Stage 7: Reporting, Analysis and Adjustment
The company should periodically report and analyse performance results, as well as make adjustments to their strategy based on that analysis. One challenge with this kind of strategic management system in China is to persuade busy managers to review the data, and then take appropriate actions or make decisions based on that data. Chinese organisations often operate within a constantly changing environment. Because of this, most Chinese managers understand the importance of learning and change.

The BSC methodology creates an infrastructure in which top management can easily track and analyse their company’s performance. This is easier if the company uses a BSC software solution. Most companies update their BSCs on an annual basis. However, as the business environment changes and BSC learning accumulates, companies tend to change some of their performance objectives, measures and targets. A fundamental aspect of the BSC methodology is making such adjustments in a timely manner to ensure the success of strategy execution.

Dr. Ivr Beiman, www.egate-china.com