Strategy execution has always been the biggest challenge for any executive in any business. A brilliant strategy, blockbuster product, or breakthrough technology can put you on the competitive map, but only solid execution can get you there. You have to be able to deliver on your intent, engage your team to understand, and put together an execution plan that serves as a blueprint for success.
When asked in the survey if employees agreed with the statement “Important strategic and operational decisions are quickly translated into action,” the majority answered no. And yet strategy execution is the result of thousands of decisions made every day by employees acting according to the information they have and their own self-interest.
Amongst the common tools used for strategy execution, the Balanced Scorecard is one of the most used management tools. The following are 3 top reasons why for more than 20 years, the Balanced Scorecard continues to outperform even the newer developed framework:
- Simple One-page Strategy Map
The Strategy Map is a one-page visual that tells the story of the company. The development of the Strategy Map is a team effort involving leaders and managers to think about the cause-and-effect relationships between the different strategic objectives. The process of creating a Strategy Map provides an opportunity to clarify areas of value creation and reach consensus over a set of interrelated strategic objectives. The key enablers or drivers of current and future performance outcomes are all identified and included for a complete picture in the Strategy Map.
According to the Balanced Scorecard usage survey, 31% of companies reported the Balanced Scorecard as extremely helpful, 42% as a very helpful framework for building and communicating strategy.
- Improved Performance Reporting
Extending the quote by Peter Drucker “What gets measured gets done”, we observe that what gets measured gets improved. The Balanced Scorecard translates strategy into objectives with measurements which provides important data for companies’ decision making. Performance reports and dashboards provided ensure that the management reporting focuses on the most important strategic issues and helps companies monitor the execution of their plan and areas they can improve on.
According to the Balanced Scorecard Forum, 80% of organizations using a balanced scorecard reported improvements in operating performance and 66% of these organizations reported an increase in profits.
- Non-financial Data Addresses Long-term Strategy
By supplementing accounting measures with non-financial data about strategic performance and implementation of strategic plans, companies can communicate objectives and provide incentives for managers to address long-term strategy. Very often, the drivers of success are “intangible assets” which financial reporting fails to show its values. Examples of valuable intangible assets are customers’ brand loyalty and employee motivation. These leading measurements are definitely better indicators of the company’s future financial performance. With the objectives and corresponding measures included in the Balanced Scorecard, it provides a reading on the “health” of the company and its long-term competitiveness.