Balanced Scorecard Usage Survey Report

Transcription

1 Survey Report Balanced Scorecard Usage Survey Report Report describing the results of 2GC s Eighth Survey in alliance with Intrafocus January GC Active Management 1 Bell Street Maidenhead Berkshire SL6 1BU UK T: E: info@2gc.eu W: 2GC.eu Copyright 2GC Limited All rights reserved. This document is protected under copyright by 2GC Limited. The following terms and conditions apply to its use: Photocopying single photocopies may be made for personal use as allowed by national copyright laws. Permission from 2GC Limited and payment of a fee is required for all other photocopying, including multiple or systematic copying, copying for advertising or promotional purposes, resale, and all forms of document delivery; Derivative Works Permission from 2GC Limited is required for all derivative works, including compilations and translations; Electronic Storage or Usage Permission from 2GC Limited is required to store or use electronically any material contained in this document. Except as outlined above, no part of this document may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of 2GC Limited.

2 1. Summary of Findings About this Survey Who took part? How well do they know the Balanced Scorecard? Results Usage - where, for what and who manages it Types of Balanced Scorecard - design and perspectives... 6 Use of standard design elements... 6 Perspectives or Headings used Design Methods: Original and Refresh Reviewing and Reporting: Frequency and Software... 9 Frequency... 9 Software and Reporting mechanisms Impact and Links to other processes Overall Satisfaction Interesting Quotes About 2GC About Intrafocus

3 1. Summary of Findings This year we again had a really good response to the survey, and as per previous years over three quarters of those responding reported that their Balanced Scorecard was extremely or very useful. Once again respondents identified the importance of the organisation supporting the Balanced Scorecard for it to be useful. As this respondent noted: Important lesson learnt: management must lead. It is critical that the implementation and usage of the BSC be supported by/led/championed at the highest level in the organisation, in order for the system to have the required influence on performance (including consequences for shortfall in performance). Culture was again mentioned as an important component of successful implementation: We started using a balanced scorecard approach around five years ago but it has only been in the past two years that we have been comfortable with business management using this process. It has taken a while to bed-in. This is more a cultural statement than anything else. Balanced Scorecard works by changing the behaviour of managers within the organisation: to be implemented successfully a Balanced Scorecard project needs to be considered just part of a more extensive change management programme - if do not make it possible for managers to change their decision making habits and behaviours, it will be hard to get value out of this valuable strategic management tool. Notable characteristics of this year s survey are: This year the proportion of respondents from the Americas and Middle East were higher, as were the number of respondents from not-for-profits and government organisations; As we found in previous surveys, the most common use of Balanced Scorecard is at the Executive level, and the most common role for Balanced Scorecard is to inform on strategy implementation activities; Organisations report that Balanced Scorecards 'works' by influencing the actions and behaviours of managers. However it is not universally true - a small but significant number of organisations use Balanced Scorecard but say that there are no consequences for missing targets. For Balanced Scorecard to be effective, it needs to be used in more than an advisory capacity A majority of respondents reported links between their Balanced Scorecards and Planning and Budgeting processes, and just less than half with Quality and a third with Risk management - this is very encouraging as it shows how well integrated the tool is with general management practices. 3

4 2. About this Survey This is the eighth annual Balanced Scorecard Usage Survey that has been undertaken by 2GC. Our aim for the survey is simple - to examine in detail how organisations are using the management tool called Balanced Scorecard, and to gain insights into what the attributes of a successful Balanced Scorecard implementation are. This year the survey questionnaire was completed by 138 respondents across 30 countries, during September - November 2016; the questions focused on finding out more about what sort of Balanced Scorecard was in use within respondent organisations and about the effect it was having on performance management and the effective execution of strategy. The respondents found out about the survey through a range of media mechanisms and completed it on-line. Respondents were self-selecting. As with two previous surveys we were helped in this work by Intrafocus, a specialist software provider. Our combined extensive experience of designing, implementing and reviewing strategic and operational performance management systems all over the world has usefully informed our analysis of the survey data. 2.1 Who took part? As has been the case in previous years, the survey was completed by a broad range of organisations. This year we had a greater number of not-for-profit and governmental respondents and nearly double the number of respondents from the services and telecoms and utilities sectors. Respondents to the 2016 survey were split equally between working for organisations with less than 500 employees and those working for larger companies. This year responses came from 30 countries. There were a similar number of responses from Europe but an increase in responses from the Americas (26% v 8% last year) and the Middle East (19% v 7% in 2015) 5,001-10,000 10% Organisation Size by employee numbers 1,001-5,000 21% 501-1,000 10% > 10,000 9% < % Participant Location 77% of respondents worked in the headquarters of their organisation with 12% (8% in 2015) of respondents in a Geographic or Product/Service Division and 9% in a Function (7% in 2015). EU 26% Americas 25% Africa 11% Asia inc Aus. 11% Middle East 20% Indian sub-continent 7% 4

5 2.2 How well do they know the Balanced Scorecard? The profile of those completing the survey questionnaire showed a very similar level of knowledge of Balanced Scorecard to the two previous years - with 19% saying they were extremely knowledgeable (21% in 2015 and 22% in 2014) and 46% very knowledgeable (46% in both 2015/2014). Those with a slight knowledge decreased slightly to 27% (31%). 6% of the respondents reported minimal knowledge (3% in 2014) and 2% of respondents selected that they had no knowledge of the Balanced Scorecard (0% in 2015). 3. Results 3.1 Usage - where, for what and who manages it The most frequently reported users of the Balanced Scorecard were at the Executive Director/Senior Management level (68%), with Departmental (45%), Board (43%), Functional (36%) and Divisional (48%), levels being less frequent. Divisional use has seen a large increase over previous years, from 33% in 2015 to 48% in % of respondents report using the Balanced Scorecard to manage strategy management/implementation and reporting on progress of these activities - down from 71% in However, operational use has increased more in line with previous years results and is perhaps a reflection of the change in types of respondents. The percentage of Balanced Scorecards ONLY used for Reporting is slightly up on last year: 27% vs 24% in There has been a decrease in the reported number of Balanced Scorecards being used for individual incentives/payments down to 17% (22% in 2015) perhaps linked to more responses from public sector organisations. Executive/ Senior Manager Department Reported role of users of the Balanced Scorecard For the third time the most reported unit responsible for operating and maintaining a 17% Balanced Scorecard was with the Unit using it (i.e. Calculate Incentives self-managed) at 31%. The next most common responsible unit was reported to be a specialist performance management unit at 28%. Other responsible units included a Strategic Board Function Division Strategic Management Operational Management Reporting ONLY 36% 45% 43% 48% Uses of Balanced Scorecard 27% 48% 62% 68%

6 Planning Unit (10%), Finance (6%), HR (5%), Quality management Unit (5%) with an additional 8% of Other' which included roles such as CEO, COO and executive management. 3.2 Types of Balanced Scorecard - design and perspectives Use of standard design elements The elements each respondent uses in their Balanced Scorecard(s) allow us to assess the type of design used. Just less than a What elements appear in your fifth (19%) of the Balanced Scorecards Balanced Scorecard? reported in this survey are Second Generation designs (36% in 2014) - as Measures & Targets they have a Strategy Map, and 62% are 68% Objective Definitions Third Generation designs with a Destination Statement which shows a clear picture of what success is being targeted. This is a very encouraging Vision Statement Strategy Map 61% 62% finding, as use of the newer (second and third) generations of Balanced Scorecard design deliver significant benefits to Reporting Tool Initiatives 46% 38% organisations over those built using the First Generation design concept (which is now over 30 years old). Destination Statement 19% More information about the three Generations of Balanced Scorecard design and Destination Statements are available from the 2GC website. 88% % report they have both Measures and Targets defined for their Balanced Scorecard; these are essential elements of any working Balanced Scorecard and we are surprised that this figure is not even closer to 100%. 55% of respondents reported that their organisation operated more than one Balanced Scorecard, compared with 63% in Multiple Balanced Scorecards are a good idea in larger organisations where one Balanced Scorecard would not capture the rich variety of its roles and responsibilities. Proportion of responding organisations having multiple Balanced Scorecards 44% 55% 63%

7 Perspectives or Headings used We asked respondents to list the perspective names used in their Balanced Scorecard. 62% of respondents said that they had multiple perspectives (72% in 2015) and most of these gave details of the names used. Financial Customer Perspective Names 77% 82% Data from the survey suggests that most organisations prefer to stick to the standard four headings popularised in early Balanced Scorecard literature (Finance, Customer, Process, Learning & Growth). Internal Processes Learning & Growth Organisational Capability Stakeholders The "Learning and Growth" heading previously tended to be the most likely to be changed, but its popularity appears to have increased significantly this year - over ⅔ of respondents said this was a perspective heading in 2016, compared to only 54% in In % of respondents reported a perspective name relating to Corporate Social Responsibility or similar, a heading that did not feature in 2016; at the same time we have seen the emergence of Risk related and Environment /Safety perspectives, which suggests new organisational priorities have been emerging recently. Risk 13% 7% 4% Environment/Safety 3% 68% 86% Design Methods: Original and Refresh The most commonly reported design approach was by Management teams for their own use (36%), followed by Jointly by Internal team / Consultants (34%). This is encouraging, as best practice design approaches are ones that involve the management team directly which helps to drive engagement and accountability. One respondent indicated that the process of implementing Balanced Scorecard was only partially complete It is progressively used and aligned with all performers in their day day to day activities. However, the automation part, rewards and cascading are not in place. It requires further and tremendous efforts of the respective leaderships. Who designed your Balanced Scorecard? Joint Internal Team/Consultants 34% Others in Organisation 22% Consultants 7% Other 1% Management Team Itself 36% 7

8 The proportion of Balanced Scorecards designed solely by consultants has remained the same as last year. 58% of respondents (54% in 2015) said that their organisation had reset their Balanced Scorecard design, and of these 82% had done this during the previous 12 months. 42% 58% Unfortunately this means that 42% of respondents could be trying to execute on outof-date objectives and targets. Our experience is that reviews are a key element of Balanced Scorecard best-practice, and a feature of the most successful implementations. Regular reviews make Balanced Scorecard a dynamic and flexible tool that reflects the changing strategic realities of the organisation. Over 61% of those who did revise their Balanced Scorecard did so in relation to an updated strategic plan. As last years survey data, 71% of these updates reflected moving priorities by changing the objectives as well as measures and targets. 72% of organisations reporting multiple Balanced Scorecards said they used the structured sequential approach known as cascading to coordinate these multiple designs. Monthly / More Often Has it been reset? Yes No What elements were changed? Objectives, Measures & Targets 71% Measures & Targets 16% Balanced Scorecard Reporting Frequency 37% Targets only 13% Cascading is an approach that unlocks one of the most powerful aspects of the Balanced Scorecard: its ability to drive strategic alignment both horizontally and vertically within an organisation. For more on Balanced Scorecard cascading, see the 2GC briefing on the topic. Quarterly Twice a Year Annually 12% 11% 40% The use of the Balanced Scorecard to measure employee performance made this very important activity a partnership between the supervisor and the subordinate. The employee participates in defining the targets and even metrics. His voice is also heard in defining performance gaps and how these are addressed (i.e. employee development planning). This method resulted in higher productivity among employees. 8

9 3.4 Reviewing and Reporting: Frequency and Software More respondents (75% v 69% 2015) than last year reported using Traffic Light mechanisms in their Balanced Scorecard reports - typically using red / amber / green status flags. Those who did not use this system reported using either a discursive review or use of simple reports but without measuring against targets. Frequency We see it as encouraging that 77% of organisations reported using their Balanced Scorecards either on a quarterly basis or more often. It is hard to see how the 23% of respondents who report using their Balanced Scorecards less often will get full value from their investment. On the following page it can be seen that a Balanced Scorecard works in organisations by influencing business actions and behaviours - if it is not regularly reviewed it is hard to see how this influence can be realised. Business Actions Behaviours Appraisals Individual Rewards Team Rewards No Influence What does your Balanced Scorecard Influence? 11% 31% 31% 41% 52% 73% Organisations that reported acting on the information obtained from Balanced Scorecard typically described the response as being pragmatic and sensible. There appeared to be far fewer negative implications for teams/individuals where objectives were not met. This year a third of the sample said there were NO consequences for missing targets, which is an improvement over the 2015 data but still surprising in some ways, as the lack of consequences weaken the link between Balanced Scorecard information and management action. But perhaps this can also be seen as encouraging - as it shows that in about half of organisations that actively use Balanced Scorecard, usage is driven by self-motivated managers rather than organisational policy. Software and Reporting mechanisms A surprisingly high number of respondents do not use any software tools to report their Balanced Scorecard. 33% of respondents were using MS office tools, such as Excel spreadsheets. Quickscore was the most commonly used specialist software. These findings do reveal an opportunity - with a few adjustments most organisations would see better returns on their investment. Introducing software automation to ensure more frequent reporting and trigger the changes which result in consequences could make Balanced Scorecard performance more effective. Reporting Tool used Bespoke 5% Specialist Software e.g. Quickscore 17% None 45% MS Office e.g. Excel 33% 9

10 3.5 Impact and Links to other processes Links between Balanced Scorecard and other Processes The primary influence of the Balanced Scorecard is on business actions and behaviours, in line with findings from last year. Its influence on team or individual appraisals and rewards is a secondary role for our respondents with a higher overall impact in these areas this year, although one of the comments suggest there are still improvements to be made! Planning Budgeting Personal Goal Setting Quality Rewards More information about how to combine the strategic management and appraisal / reward roles of Balanced Scorecard can be found at the 2GC website s resource area. We also examined the links between the Balanced Scorecard and other processes, such as Planning, Budgeting and Quality and Risk Management. Risk Other 4% 30% 35% 49% 45% 55% Satisfaction with Balanced Scorecard in % As we expected there are strong / frequent links between Balanced Scorecard and Planning and Budgeting, however the proportion including explicit links to strategic plan elements (such as a Destination Statement or Vision Statement) has fallen slightly this year. 3.6 Overall Satisfaction Very 41% Extremely 35% Somewhat 23% Not at all 1% One of the most important findings of the survey was that 76% of respondents (67% ) felt that their Balanced Scorecard was extremely or very useful. 23% of respondents said it was somewhat useful.. Only one person said it was not at all useful: their related comments report a lack of regular reporting and management involvement, and so the reported lack of utility is not in these cases surprising. In % of respondents think that using Balanced Scorecard in their organisation, has made it 'very much easier to understand organisation objectives. Does Balanced Scorecard make organisations s goals clearer? Somewhat 44% Not at all 6% Very much 50% 10

11 3.7 Interesting Quotes When completing the survey many respondents include short statements about their experiences with Balanced Scorecard. While these mostly are to inform / qualify the information provided in the survey, but sometimes the information is useful in a more general way. Here are a few of these interesting quotes In just a few years, the use of balanced scorecards has brought the company a long way in terms of getting all divisions and people within those divisions working together, on the same page, toward common goals. It has helped the staff to focus what matters in order to improve organisational performance. It gives a different spectacle view of organizations and measures what matters the most Utilizing the balanced scorecard has allowed us to have a consistent message to team members as well as quickly move on high impact projects that drive organizational success. Its constantly used, and by 95% of the organisation, but it has no power over decision making. It just influences on the performance evaluation and retribution (on team level) BSC has helped communicate the strategic direction of the organization, however there is so much resistance to adopt and fully implement the BSC. The Balanced Scorecard measures being used are recognized by managers and Executive Team as important, but, cascading of the measures to lower levels does not result in full staff commitment and engagement to the measures. More needs to be done to get buy in from the teams in the respective operating divisions. As usual we are meeting everyday with challenges of implementation. Value is huge but we are still struggling to get buy in, even from higher level management people. 11

12 About 2GC 2GC is a research-led consultancy expert in addressing the strategic execution and performance management issues faced by organisations in today's era of rapid change and intense competition. Founded in 1999, UK-based 2GC has worked with organisations in 50 countries on five continents, helping senior management teams to implement their strategic goals. Central to much of 2GC's work is the application of its 3rd Generation Balanced Scorecard, an approach to strategic implementation, strategy management and performance measurement. For more information on 2GC s approach: visit the 2GC website telephone us on or us via info@2gc.eu. About Intrafocus Intrafocus is a corporate performance management software reseller and consultancy. Intrafocus supplies software into Europe, the Middle East and Africa. The software provides a structured framework enabling strategic alignment through linked business objectives, key performance indicators and initiatives. The software can be easily integrated into any strategic planning process or added later as a management tool. Please take a moment to visit the Intrafocus website. 12

13 2GC Active Management 1 Bell Street Maidenhead Berkshire SL6 1BU UK T: E: info@2gc.eu W: 2GC.eu