Implementation of the Balanced Scorecard The Balanced Scorecard was originally conceived as a performance management system to translate the

goals of an organization into targets and enables a company to align its management processes and focuses the entire organization on implementing its long-term strategy. Through the Balanced scorecard an organization monitors both its current performance and its efforts to improve processes, motivate and educate employees and enhance systems. Therefore we can agree that it is a process for managing the business. It could also be used as to implement strategy at all levels in the organization by facilitating the following functions.

Moreover, a management system does not appear instantaneously. Because of its scope, complexity, and impact, a new management system must be phased in over time. This approach is preferable since, as each element of the system is changed or embedded, the CEO has an opportunity to unfreeze the organization from its previous processes and send a message about the new process.

The first few steps in the implementation process include the following: Clarifying Strategy this looks at transforming the strategic goals of the organization into quantifiable measures that will be used to explain the leadership team understanding of the strategy. Communicating Strategic objectives the leadership team must communicate how these objectives

Planning and goal setting targets must be aligned and developed to facilitate the translation of strategic objectives of the organization into SMART (specific, measurable, achievable, time-bound and realistic) targets.

Strategic Feedback and learning communication between management and employees must be consistent and ongoing to ensure that the implementation of the balanced scorecard is proceeding according to plan and is producing the necessary results.

These functions have made the Balanced Scorecard an effective management system for the implementation of strategy have been applied successfully to private sector companies, non-profit organizations, and government agencies.

Change Management Comes First

It must be noted that a prerequisite for implementing the balanced scorecard is a clear understanding of the organizations vision and strategy and its change management process. The implementation of the balanced scorecard is most effective when its part of a major change process in an organization. Performance management experts Rohm and Halbach states that the process is one more about changing hearts and minds and sustaining new directions, that it is about selecting performance measures..

Change management is always going to be a major challenge in deploying the balanced scorecard system, because it must touch every significant activity in the organization. Simply, driving change or successfully improving performance with the balanced scorecard requires a prerequisite state of process, system and cultural readiness.

The implementation of a successful Balanced Score Card initiative starts with the acknowledgement that it is a change process. During a change process, every

organization, regardless of type and structure, needs a transparent and cohesive performance management framework that is understood and supported by all levels of the organization, even the grassroots level. Since the balanced scorecard process affects everyone in the organization, it has to confront the organization's culture.

Further, introducing a new management system centered on the Balanced Score Card must overcome the organizational disinterest that tends to cloak and absorb any change programme An organization needs transitional leaders and managers who facilitate the building of the scorecard and who help embed it as a new management system. A change management process facilitates such an undertaking, and is structured to shift/transition individuals, teams, and organizations from a current state to a desired future state. It is an organizational process aimed at empowering employees to accept and embrace changes in their current business environment. Organizations must be mindful that habits are a normal part of every persons lives, but it is often counterproductive when dealing with change. Employees often view changes as a negative thing, something that creates instability and insecurity. A normal change management process often evolves trough number of mental phases: a. Denial: fighting the change and protecting status quo. b. Frustration and anger: avoiding the change and becoming insecure because of lack of awareness. c. Negotiation and bargaining: trying to save the old ways as much as possible

d. Depression: realizing that none of the old ways can be incorporated into the new. e. Acceptance: accepting the change, and starting to prepare mentally. f. Experimentation: finding new ways, and gradually removing the old barriers. g. Discovery and Delight: realizing that the change will improve the future possibilities. h. Integration: implementing the change.

John Kotter in Leading Change provides a description of the conditions that should prevail in order to ensure success. The most important of these is a sense of urgency in the senior management of the organization. This effort should not be

underestimated, because success depends on their consistent support and understanding of the initiative.

The eight step model, proposed by John Kotter (1996), could be broadly categorized into three areas that are fundamental to a successful change management program. The first three relate to the planning of the process thereby creating a climate for change. The next three relates to engaging and enabling the organisation, and the last two steps relate to implementing and sustaining the changes brought about by the first two phases. This association is illustrated in the table below. The three phases provides the basis for the evaluation of the balanced scorecard as an evaluation tool in the different phases. These can be described as three unique sub

problems identified in the planning, implementation and the evaluation and sustaining phase and determining whether they were correctly applied. Linking the eight step model to three important phases of change

The Eight Steps 1. Establishing a sense of urgency 2. Creating the guiding coalition 3. Developing a vision & strategy 4. Communicating the change vision 5. Empowering broad based action 6. Generating short term wins

The Three Phases

PLANNING

IMPLEMENTATION

7. Consolidating gains & producing more change 8. Anchoring new approaches in the new culture EVALUATING & SUSTAINING

Another framework that can be used to understand the change process in organization belongs to the famed social psychologist, Kurt Lewin, who developed a three stage model of planned change, which explains how to initiate, manage, and stabilize the change process. Force field analysis (Lewin 1951) is widely used in change

management and can be used to help understand most change processes in organisations. In force field analysis change is characterized as a state of imbalance

between driving forces (e.g. new personnel, changing markets, new technology) and restraining forces (e.g. individuals' fear of failure, organizational inertia). To achieve change towards a goal or vision three steps are required.

Lewin developed a three stage model of planned change, which explained how to initiate, manage and stabilise the change process. The three stages are unfreezing, changing and refreezing. Lewin change model Unfreeze ready to change When a structure has been in place for a while, habits and routine have naturally settled in. The organization as a whole is going in the right direction, but people or processes may have strayed off course. For example, tasks that are not relevant or useful anymore are still being performed by force of habit, without anyone questioning their legitimacy. Similarly, people might have learned to do things one way, without considering other, more efficient methods. Unfreezing means getting people to gain perspective on their day-to-day activities, unlearn their bad habits, and open up to new ways of reaching their objectives. Basically, the current practices and processes have to be reassessed in order for the wheels of change to be set in motion. Lewin change model Change implementation Once team members have opened up their minds, change can start. The change process can be a very dynamic one and, if it is to be effective, it will probably take some time and involve a transition period. In order to gain efficiency, people will have to take on new tasks and responsibilities, which entails a learning curve that will at first slow the organization down. A change process has to be viewed as an investment, both in terms

of time and the allocation of resources: after the new organization and processes have been rolled out, a certain chaos might ensue, but that is the price to pay in order to attain enhanced effectiveness within the structure. Lewin change model Freeze (sometimes called refreeze)- making it stick Change will only reach its full effect if its made permanent. Once the organizational changes have been made and the structure has regained its effectiveness, every effort must be made to cement them and make sure the new organization becomes the standard. Further changes will be made down the line, but once the structure has found a way to improve the way it conducts its operations, re-freezing will give the people the opportunity to thrive in the new organization and take full advantage of the change. Many quote the model as saying the third step of this approach is to re-freeze, when in Lewin's original work it was freeze. The following diagram illustrates the Force Field Analysis by Kurt Lewin:

Moreover, Kurt Lewins 3-step process (Unfreeze-Change-Freeze) provides a high-level approach to change. It gives managers or other change agents a framework to implement when leading change within an organization.

Barriers to Implementing the Balanced Scorecard

To effectively execute the balanced scorecard organizations must understand and overcome four major barriers.

Management Barrier

Lack of feedback on how the strategy is being implemented and whether is working within the organization is major cause of failure of the balanced scorecard. It must be noted that many management systems provide feedback on operational aspect of organizations by tracking their financial measures. The balanced scorecard demands that management understand the under-lying value creating or destroying mechanisms in the organization. Closely associated with this challenge is commitment from the senior executive, which is paramount to the success of the balanced scorecard implementation. Effective implementation of the BSC requires on-going commitment and organizational culture change driven by the leadership of the organization.

Culture can be described as a set of values, beliefs, assumptions, attitude and behaviors shared by a group of people. It is often said to be a set of unwritten rules for working together established by a groups behavior. Therefore the organizations culture consists of all of the experiences that each employee bring to the organization. It is

influenced by the organizations leadership team because of their role in decision making and strategic direction. Inconsistencies between their behavior and values can negatively affect the implementation of the balanced scorecard. Example , if the organization promotes teamwork then employees may appear to agreed to the premise but will continue to function differently if the reward and recognition system is geared towards individual effort. The leadership style of the organization must therefore adopt a top down direction and upward influence approach to remove management barrier and establish a successful implementation of the balanced scorecard.

Human Resource Barrier

Strategy may not be linked to the organization, departmental or individual goals. The Balanced scorecard is a powerful tool that allows organizations to distinguish their value creating activities through critical success factors. The strategy of the organization must be expressed in measurable action over a short to long term basis. It must therefore ensure that all employees understand how their day to day activities affects the organizations ability to achieve its stated goals. A feasible balanced scorecard can only exist in a culture of communication and participation. A participative environment with a flow of communication between executives, managers and employees will allow for a greater success for implementing the balanced scorecard. The use of feedback and group consultation provided by a cross section of representatives of all employees concerning the methods of accomplishing the organizations strategy engenders commitment and buy-in. It also improves the alignment of all organizational participants to the strategy.

Resource Allocation Barrier

According to Kaplan and Norton 85% of the time, energy and money are not allocated to those things that are critical to the organization. Some organizations have separate processes for strategic planning and budgeting. This can lead to trade-offs regarding implementation of some strategic objectives.

Vision Barrier

In organization different groups of people may pursue different agendas caused by lacking consensus and clarity. The process of developing the balanced scorecard forces Management to get agreement form all stakeholders on strategic objectives and alignment to job descriptions. Once employees can understand the vision of the organization then they can focus their energies toward achievement of goals and objectives.

Best Practice in Implementing the Balanced Scorecard

To successfully implement the balanced scorecard in any organization it is important to identify the best practices. An evaluation of the success stories of Philips Electronics and Aliant illustrated the following elements that are key in the implementation process of the Balanced scorecard.

Promoting ownership, commitment and accountability for results at all levels of the organization, especially at the Executive management level. Research clearly shows that strong leadership is paramount throughout the performance

measurement and improvement process. Senior management should frequently conduct formal and informal meetings with employees and managers to demonstrate support for the initiatives of the balanced scorecard An organization-wide adoption of the Balanced Scorecard, that is, across all key organizational functions to provide a co-ordinated framework and a common approach for all organizational performance measurement efforts, a common basis and language for understanding measurement results for all employees and a big picture of the organization. Utilising the Balanced Scorecard to provide objective data for business decisions. This can be used a base for business decisions from allocation of available resources to future direction. This will further integrate the Balanced Scorecard into the way we do businesses and help the organization reach effective decisions. Aligning performance measures and targets with the organizations goals and objectives thereby fostering day-to-day activities consistent with the overall strategic direction. When the organization completes this process successfully employees are aware of what they do, as outlined in their job descriptions, and how it contribute to the success of the company. Focusing on employee training. Training must be provided to ensure that all stakeholders (management and employees) fully understand how the balanced scorecard measures affect the organizations goals and objectives, how the targets are aligned to their job functions and how to use improvement tools and

techniques to action outcomes for continuous learning. Comprehensive training would therefore expand employees technical capabilities and achieve buy-in. Facilitating a change management process which will break down organizational barriers. Changes within any organization may stir up resistance based on unfounded fears about perceived negative effects of the

implementation of the balanced scorecard. To overcome such resistance and barriers it is necessary that the change management process is implemented correctly. Strategies such as open communication with employees and managers explaining the need for and benefits of the balanced scorecard will assist in alleviating concerns and fears as well as enabling a participative environment. Another strategy may be the communication of success stories that illustrate how the balanced scorecard has positively impacted on the profitability of the organization leading to improved benefits for staff. Aligning the reward and recognition system. Organizations should tie incentive to performance as measured by the balanced scorecard. This will tend to reinforce the organizational goals and objectives being measured.