Balanced Scorecard Usage Survey 2010

Transcription

1 Balanced Scorecard Usage Survey 2010 Summary of findings 2GC Limited, All rights reserved. This document is licensed under a Creative Commons License. You are free to copy, distribute, display, and perform the work subject to the following conditions: Attribution. You must give the original author credit; Non-commercial. You may not use this work for commercial purposes; No Derivative Works. You may not alter, transform, or build upon this work. For any reuse or distribution, you must make clear to others the license terms of this work. Any of these conditions can be waived if you get permission from the copyright holder. More information on this license from

2 Why do a survey? The Balanced Scorecard has been one of the world s top-ten management frameworks of any kind, and the number one framework for Performance Management specifically, since it was introduced in the early 1990 s. But despite (or perhaps because of) this, little is known about what kind of organisations use Balanced Scorecard, what they use it for, and how useful it is in practice. This survey collected information about the answers to these questions. Who participated? Well informed managers, in corporate or staff roles: a profile that helps us have confidence in the quality of responses provided. Over 50% declared they were very knowledgeable concerning the Balanced Scorecard - 30% said they were extremely knowledgeable. Over two-thirds worked in the headquarters of their organisation. Only 18% were in a functional role. How did the survey work? A simple questionnaire developed from the survey tool used in 2GC s 2009 survey. The questionnaire publicised in February 2010 through various methods to people interested in or working with corporate Balanced Scorecards. The questionnaire was made available via a web-based tool, and as a printable document that could be completed and mailed or FAXed back to 2GC. Each version had identical structure and questions. Respondents from 50 organisations participated. The respondents were self-selecting. Why did 2GC do this survey? We think that learning more about the answers to these questions will improve the use and understanding of the Balanced Scorecard and also help us do our work better. 2

3 Participating Organisations Who uses Balanced Finance 14% Transport/ Utilities 10% Manufacturing 14% Scorecard? Other 18% Services 24% Sectors Government 10% NFP 8% The survey was completed by organisations spread across a number of sectors: around 20% were not-forprofit or governmental. Three-quarters had less than 10,000 employees. Over two thirds report that their Balanced Scorecards are for Executive or Senior Management teams. 60% reported that their organisation has more than one Balanced Scorecard. <1,000 55% 1,000-10,000 20% >10,000 24% Organisation Size Reported role of users of the Balanced Scorecard? Functions 15% Executive & Board Level 36% Department 16% Division & BU Level 33% Is this what was expected? The mix of organisations reporting, their average size, and the emphasis on Balanced Scorecard as a tool for senior managers are all consistent with 2GC s expectations, based on our 11 years of experience working with organisations around the world on Balanced Scorecard design. The bias towards smaller organisations, and towards more senior management teams is perhaps explained by considering the decision making process required to choose to develop a Balanced Scorecard. Designing and implementing a strategic Balanced Scorecard consumes management team time and resources. The more senior the team, the easier it is for the decision to be made to allocate these resources. In small and medium sized organisations, this required decision making process may be easier to execute. This is something we hope to investigate in future surveys. Have things changed since the last survey? The 2009 survey had more organisations with over 10,000 people in percentage terms, but the balance of sectors, and profile of roles is about the same. 3

4 What is influenced by Balanced Scorecard in your Organisation? Uses of Balanced Scorecard Strategic Management 34% What are Business Actions 71% Reporting 29% Balanced Behaviours Appraisals Individual Rewards Team Rewards 41% 39% 35% 65% Using Balanced Scorecard for Rewards: it s a Finance Thing Over 80% of respondents from the Financial Services sector reported the use the Balanced Scorecard as an individual or team performance measurement / incentivisation tool. Fewer than 20% of the non-financial organisations that participated in the survey reported similar use. Operational Management Goals & Incentives 17% 20% Is this what was expected? Yes. The focus on strategic management is consistent with the origins of Balanced Scorecard. Balanced Scorecard as a non-financial reporting device, and as a support operational management are two popular alternative uses. Only two respondents said that Balanced Scorecard had no influence on their organisation s actions and behaviours - a Balanced Scorecard that does not influence actions or behaviour is of little value. Have things changed since the last survey? The apparent increase in use of Balanced Scorecard for Goals and Incentives is mostly due to a greater representation in the survey from Financial Services firms (14% this year, 5% last year). Scorecards being used for? Balanced Scorecard s primary roles are as an aid to strategic management, informing decision making and the reporting of results. Balanced Scorecard drives organisational performance by influencing the actions and behaviours of managers and individuals. Apart from in the finance sector, the role Balanced Scorecard plays in team or individual appraisals or rewards is a side-effect of its primary role in influencing actions and behaviours, rather than an end in itself. 4

5 Reporting Frequency 43% Monthly 30% Quarterly 13% Six-monthly How is Balanced 64% of respondents use a Traffic Light system to highlight performance in their Balanced Scorecard reports Annual 13% Scorecard used? Reporting Software Office Software 58% Specialist Balanced Scorecard Software 13% Other 5% None 24% Over 70% of the Balanced Scorecards covered by the survey are reported either quarterly or monthly. Balanced Scorecards that are reported six monthly or annually were used exclusively for paying incentives. Two-thirds reported that there were clear consequences for poor performance against Balanced Scorecard metrics and targets. About one in four of Balanced Scorecard reporting systems were web enabled, with this feature being seen in the smaller as well as the large organisations. Is this what was expected? To have any real chance of triggering changes in performance, a Balanced Scorecard needs to be reported. The Balanced Scorecards in this survey are being regularly reported, and are also described as being effective at changing actions and behaviours (see previous page). Have things changed since the last survey? This year more Balanced Scorecards are being reported on a monthly basis than before. Use of standard office software to generate Balanced Scorecard reports has increased sharply since last year. 5

6 What sort of Types of Balanced Scorecard used Perspective Names Customer 22% Balanced 1st Generation 7% 3rd Generation 37% Financial 19% Scorecard design 2nd Generation 56% Stakeholder 15% is in use? Learning 15% The survey asked about the design elements that featured in respondents Balanced Scorecard. Most (over 90%) included elements specific to 2nd or 3rd Generation designs. We also asked respondents to list the perspective names used in their Balanced Scorecard: organisations reported between 2 and 5 perspectives (average 4). The reported Balanced Scorecards included, on average, 26 measures Is this what was expected? The results reflect how Balanced Scorecard design methods have evolved since the early 1990s. For over a decade, books and articles have been encouraging use of the more advanced and more effective 2nd and 3rd Generation Balanced Scorecard designs methods. It is encouraging to see that these modern design concepts are widely used. Since the mid-1990s commentators have proposed changes to the number of and names used for the Balanced Scorecard perspectives. The survey shows that the original four headings remain dominant - though the emergence of stakeholder and learning as popular headings may indicate these suggestions are beginning to have an effect. Internal Processes 13% People 11% Operations 6% Leadership 4% 6

7 41% How valuable is your Balanced Scorecard? 18% 50% 27% 9% 45% 9% Extremely Very Somewhat Not at all Management team involved in design Designed without the management team 0% Balanced Scorecard Resets Who designed the Balanced Scorecard? Consultants 14% Management Team Itself 56% Others in Company 27% Performance team 3% How was the Balanced Scorecard designed? Involving the management team that will use the Balanced Scorecard in its design dramatically improves its value. Over 90% of such Balanced Scorecards were rated as very or extremely valuable compared with just 45% for those designed WITHOUT management team involvement. 33% Yes 67% Has it been reset? 15% Within last 12 months 84% When was it last reset? Objectives, Measures & Targets 56% Measures & Targets 37% Targets only 7% What elements were changed? Two-thirds of organisations have refreshed their Balanced Scorecard design: most during the previous 12 months. Over 80% of the revisions were linked to updated Strategic Plans. Over 50% changed objectives, measures and targets. In organisations with multiple Balanced Scorecards, over two-thirds were created using a structured sequential approach known as cascading. 7

8 Conclusions / Observations As last year, the survey shows that Balanced Scorecard is a useful management tool. A typical Balanced Scorecard has between 20 and 30 measures, is based on relatively modern design principles, is one of several Balanced Scorecards within the organisation; it mostly likely being used by a senior management team as an aid to strategic management, and is directly influencing their actions and behaviours. Well designed Balanced Scorecards work. The survey shows that Balanced Scorecards provide the highest value when they are designed and implemented with user involvement - confirming a design policy that has been central to 2GC s work on Balanced Scorecard design and implementation. The survey identified important secondary uses of Balanced Scorecard - supporting operational management, and the delivery of individual appraisals or rewards. This finding reconciles well with another 2GC design principle - that there are different types of Balanced Scorecard application, each needing its own specific design approach. Overall, the survey shows that Balanced Scorecard remains an important and effective management tool, but one whose value relies on getting the design and implementation right. 8

9 Find out more Read some stuff - See 2GC s collection of FAQs, Papers, Presentations, Case Studies Get some training - 2GC runs one-day and two-day training courses on Balanced Scorecard design and implementation throughout the year Ask us a Question - We will send you an answer for free (if we can and if we have the time). Send an to Ask2GC@2GC.co.uk We may choose not to answer... No coursework questions 9

10 Help us with the 2011 Survey Please let us know if you would like to participate in or help with carrying out the 2011 Survey. Send us an to at The questionnaire will be available from February