The majority of South African companies have great strategies. Yet the majority of them fall short of achieving their desired results. In South Africa we rank high on the thinking stakes, but low on the implementation scales.
What is it about execution that eludes us and creates this discrepancy? Moreover, what can we do about it?
Business leaders the world over have grappled with this challenge, but one of the systems that has come out on top is called the “Balanced Scorecard”. Many corporations are familiar with the idea of a scorecard; in fact, its legacy dates to the early 1900s when French companies used the “tableau de bord” – or dashboard.
The modern scorecard, however, was revitalised and developed in the early 1990s by Harvard Business Professor Robert S Kaplan.
Since then it has been used by a host of big brand names, ranging from HSBC to Volkswagen. The Balanced Scorecard is a management system that drives businesses and organisations to clarify their vision and strategy and convert those into action.
The Scorecard method provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results.
Sounds like an academic exercise? Perhaps on the surface – but it helps change strategic planning from a routine boardroom exercise prone to the cynicism of employees, to a process that genuinely enables better risk management and improved decision making.
South African corporations such as Engen and Dimension Data are already using the Balanced Scorecard to assist them in delivering results to shareholders and stakeholders.
Entrepreneurial firms such as ICT Works, a black women-owned business driving service delivery through the use of technology, has been using the Scorecard for three years, with outstanding results.
They have doubled their revenues and dramatically increased their net profit and gross margin. This year, ICT Works won a Standard Bank Top Women award for their achievements.
Scorecards translate a business vision into actionable chunks. Translating the big picture strategy into tangible concrete steps and metrics is key for any successful implementation. The objective of Kaplan’s Scorecard is to enable employees to move, change direction and implement their thinking faster than their competition.
Many executive teams have reported to Kaplan that the process of creating the strategy map and scorecard created a shared understanding, consensus, and commitment to the strategy that never existed before; the process was even more valuable than the end product itself.
Scorecards drive better performance. Being able to review progress towards an end-goal drives teams and individuals to achieve more. Related to this, Scorecards help ensure that everyone knows what should be measured, how they should be measured and what metrics should be used. Performance can then be properly monitored.
Good monitoring, in turn, results in the information that is needed to take decisions and manage risk.
Scorecards also help tackle the well-known difficulty of keeping the right balance between operational and strategic factors in any business, thus encouraging balanced performance.
Many entrepreneurs and other business leaders have learned the hard way that an overemphasis on any one strategy may result in a loss of opportunity somewhere else. Scorecards help keep all these factors in view, including what may be missing.
Last but not least, Scorecards communicate – they tell an undistorted story, a comprehensive picture of factors influencing the business, which can be presented and understood by investors and analysts.
Tools like the Balanced Scorecard, and their use by successful South African businesses, show that there are ways to make great business strategies deliver, overcoming the discrepancy between excellent thinking and poor implementation. Accordingly to a 2015 management tools study by Bain and Company, 20 years later, Kaplan’s framework remains one of the top-performing frameworks. May its adoption by South African business leaders – and its positive ripple effects for our economy – long continue.
* Nicola Tyler is chief executive of Business Results Group who, in conjunction with the Gordon Institute of Business Science, is hosting Harvard Business School Professor Robert S Kaplan in South Africa this month.
** The views expressed here are not necessarily those of Independent Media.