The Smarter way to better Business

So, why should a small company like mine use a Balanced Scorecard?
by Paul Bergquist, CEO, Axsellit AS

When we created the first version of Dialog Strategy , back in the late ’90s, only Fortune 500 companies worked on implementing their scorecard systems based on our approach. At that time, all the examples available in Kaplan & Norton’s books were about the successes of huge corporations. In addition, the software was extremely expensive (which probably explained why only the top corporations and the most expensive management consultants caught on to the idea).

So, what prompted us to produce a product line for small and medium-sized businesses? To be honest, it was not a business decision based on pages of business statistics. Rather, we decided to do this because we could not imagine anyone benefiting more from this method than small and medium-sized enterprises (SMEs).

To understand why we believed, and still believe, SMEs can benefit so much from this approach, it is important to understand exactly what kind of influence the Balanced Scorecard (BSC) has on the way a company behaves.

  1. A Balanced Scorecard guides managers to dedicate scarce resources such as their “management focus” and the company’s manpower (and even money!) to achieving the planned results, as opposed to being distracted by the many “focus thieves” that constantly try to steal their attention.
  2. A Balanced Scorecard makes employees aware of how the various tasks in an organization are connected—and exactly how their day-to-day operations fit into the big picture. This knowledge empowers responsible employees to spend their resources in the most beneficial ways.
  3. A Balanced Scorecard introduces a result-focused sense of urgency and peer pressure in the organization, prompting the employees to pull together and concentrate on the vital issues.

In short, with the Balanced Scorecard approach, companies focus their energies on achieving results while using their scarce resources optimally. Now, show me a business owner who would tell me this has no relevance to his or her business because it is too small!

As an SME manager myself , I know all about the “other” things that “need to be done” before we can create our scorecard. However, I have learned through my own personal experiences that this is something that has to take priority. I have also experienced the overall gains realized from adopting the Balanced Scorecard. This exercise has to take priority simply because the time invested in it actually pays off in the first month after implementation. Knowing this, can you really still justify postponing improving your results?

One cautionary note, though: small businesses are well advised to take a step-by-step approach to implementation.

Start by setting up the Strategy Map based on your business plan (you know, the one that’s hiding there at the bottom of the drawer). ;-)

  • Next, measure the most vital metrics. But don’t try to measure everything from day one. As you gain experience, you will find that you need more information in some areas and that other areas are really not that important.
  • Meanwhile, please don’t fall into the trap of measuring only the metrics that are easily available. Spend the time it takes to capture data that is vital, and don’t spend your time focusing on irrelevant metrics just because they are there.
  • Finally, choose an affordable software solution that is manageable by your own staff. Keep the ownership of the scorecard inside your organization. Make sure you have the knowledge to change your objectives, metrics and actions as you gain knowledge or your surroundings compel you to make changes.

Copyright 2005, Axsellit AS
This article may be freely linked to, but not copied.

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