Balancing act
Ever heard of ‘Balanced Scorecard’? As its name implies, it can help you take better control of things
Ever heard of the ‘Balanced Scorecard’? As its name implies, it can help you take better control of things in your business. And it would only take eight simple steps to get your strategy working well. And remember one more thing: what cannot be measured cannot be managed.
What does not get measured seldom gets managed. If the most important agenda for the CEO is to drive the strategy of the organisation, then it’s time that attention is paid to making the strategy measurable. And this is where the effectiveness of execution comes into play. Ultimately, effectiveness is about doing the “right thing”, and about prioritising the more important areas over lesser priorities.
If you are the CEO of a medium to large fintech enterprise, chances are that you are already dealing with one or more challenges.
Take some solace. There may be some solution at hand. The Balanced Scorecard precisely looks to drive the execution of strategy by bringing in the discipline of performance management into the day-to-day culture within the organisation. The good news here is that there are eight simple steps to get your strategy working, leveraging the Balanced Scorecard. Considered as one of the most seminal concept in driving performance measurement, the BSC has been adopted by most Fortune 500 companies. While the principles are quite common and industry agnostic, there may be a few nuances that are more specific to fintech companies, that we will explore in this article. by the simplicity of its message. Unfortunately, the problem starts right there. If you are unable to set the priorities, there can always be the confusion on the default mode of operation at a tactical level.
It is obvious, that in most situations, there cannot be a middle path. One may have to define the priority upfront, and set the course moving, especially if you are in a growth phase. If we could articulate the top 20-25 objectives of the organisation in simple, unambiguous and easy-to-understand phrases, then we have already set our foot on the right track.
Step #2: Develop the strategy
map: Once the strategic objectives are defined, it important that they are articulated in a way where the linkage across objectives are more pronounced, which makes the connects quite obvious for everyone in the organisation.
For instance, should there be no performance management culture (a learning and growth objective), it would be hard to drive an effective sales framework (process objective) impacting customer engagement (customer objective) and ultimately the revenue and profitability. Step #3: Define measures to make the objectives meaningful: In case you missed the first line of the article, here it is again for you. What cannot be measured, cannot be managed. Ultimately, the art of management is being able to tell if the job was done, and if it was done well. Unless there is a clarity on what is to be done, and how is it to be measured — both by the doer and the observer, it is always likely to be an area of discord.
And therefore the need to embrace the art of measurement. Unless the measure is appropriate, there is every likelihood for the objective being hijacked in the wrong direction. It is but a well-accepted phenomenon that people respond to what is inspected, and not what is expected.
Step #4: Assign ownership to objectives: Every successful project has many parents, and every failed project is an orphan. Sounds familiar? Well, that’s the reality and it pays to embrace it proactively. Making people accountable is the starting point of getting some action executed — or at least ensuring someone is monitoring the execution. Invariably, where the objectives do not have a defined owner, they all end up in the lap of the CEO, or go through a merrygo-round with fingers pointing elsewhere. Ownership to the enterprise objective should not be misconstrued to be that of the individual performance measure.
Step #5: Align initiatives to objectives: One of the most common mistakes that occurs in strategy execution is where the means and the end get mixed up. The initiatives by themselves are not critical, unless they help to deliver a strategic objective. The setup of a new international office in itself cannot, for example, be an objective. That can, at best, only be the means to drive revenue or market share of a certain geography.
A cardinal principle when it comes to initiative definition is to ensure that there are no initiatives in the “strategic radar” unless they directly impact or influence the objectives defined in the strategy map. Step #6: Define targets — measurement frequencies and units: Targets serve as the anchor points in the performance for both individuals and organisations. The best performances — be it on the F1 circuit or on the tennis court or on business platforms are always when there is a target to beat or achieve. Which is why it tends to get harder at the top, to keep pushing to the next level.
It is important that targets are not just defined for the financial measures, but also for the nonfinancial measures (customer, process and organisational). Assuming there are 20-25 objectives, and each objective has one to two measures, the thumb rule is to keep the number of measures less than 35-40. Else it gets hard to measure.
Step #7: Imbibe the discipline of
monthly reviews: The benefits of yoga are derived only when you practice it. No matter how good your Yoga instructor is, or no matter how good your BSC is, the value is zero if there is no discipline in imbibing it as a habit. It’s hard to resist the ‘snooze’ button, be it in the morning wake-up alarm, or the monthly review discipline. Bringing the culture of performance management is directly correlated to the sincerity and discipline of making it a mandatory process of review, with corrective actions being monitored. What is important to the boss is what is important to the subordinate. If performance measurement is not the CEO’s priority, it can never be the organisational priority.
Step #8: Follow the ‘top-drawer’
rule: Many years back, our chairman had shared an experience he had with an important client who was quite successful in managing his time. And the secret was the “top-drawer rule”. It’s quite simple, but very effective. Whenever a subordinate had come into the office of this CEO seeking his time, the first point of reference was the one-page Balanced Scorecard that was kept in the top of his table drawer. If the discussion was not related to any of the strategic objectives, then the conversation ended there. It simply made the focus of vision and ruthlessness of execution far more razor-sharped.