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In theory, Balanced Scorecard implementation is a clear and not so complicated process. While the implementation and usage of a performance management system in large companies has been thoroughly analyzed, the characteristics of the SMEs raise question on how should a Balanced Scorecard be customised and implemented in order to generate the benefits a SME needs.
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BALANCED SCORECARD IMPLEMENTATION IN SMES: FROM THEORY TO PRACTICE
International Conference Business Excellence 16 - 17 of October 2009
About us
Acumen Integrat is a Romanian management consulting company specialised in performance management solutions, project management and technology integration services.
Our business model is based on working along organisations to understand their objectives and challenges and identify customised solutions that add value to their activities.
Our vision is to be recognised as one of the most capable, progressive and innovative Romanian consulting companies.
Balanced Scorecard implementation in SMEs:From theory to practice
In theory, Balanced Scorecard implementation is a clear and not very complicated process. While the implementation and usage of a performance management system in large companies has been thoroughly analyzed, the characteristics of the SMEs raise question on how should a Balanced Scorecard be customised and implemented in order to generate the benefits a SME needs.
The path
The premises
Benefits of Balanced Scorecard
Balanced Scorecard in SMEs
Limitations
Balance Point
Conclusion
No matter the size and industry, every organization wants to achieve performance, and strives to find new and better ways for this purpose.
Organizations aim for:
Star
Employees Resources Processes
Star
Company
Performing company
Just as performance, profit is an implicit desire of any company. If profit is never let at free will, and there are
always being searched new ways to maximise it, why
shouldn’t this happen with performance too?
Performing company
One way to increase the performance of a company is to use business tools, like Balanced Scorecard.
The path
The premises
Benefits of Balanced Scorecard
Balanced Scorecard in SMEs
Limitations
Balance Point
Conclusion
A clear sense of direction
Source: “Dilbert - A Treasury Of Sunday Strips: Version 00” by Scott Adams , (Andrews McMeel Publishing 2000)
An ability to focus and prioritize
Organizational agility
Management teams need systems that are simple and easy to use.
With Balanced Scorecard this aspect can be achieved, so the organization will not have to deal with formulas or graphs like these.
A profound understanding of the business model
A profound understanding of the business model
The path
The premises
Benefits of Balanced Scorecard
Balanced Scorecard in SMEs
Limitations
Balance Point
Conclusion
Small business should think about Balanced Scorecard in a different way than large-sized corporations do.
Balanced Scorecard in SMEs
Balanced Scorecard in SMEs Low degree of formality needed
to monitor Quicker and easier re-
prioritization No expensive administrative
procedures Fewer time to act upon the
Balanced Scorecard measurement
Less complexity and fewer people generally speeds up the process in SMEs, and changes are much more easier to be managed.
In a large organization, much of the impetus behind the balanced scorecard’s design will be driven by a desire to get a clear picture of the business. As organizations grow and become more complex, senior managers can lose track of their business’s culture and lose control of its performance as a result – something a balanced scorecard can fix.
Balanced Scorecard in SMEs
Managers in an SME don’t have this problem, and can focus instead on creating a strategic vision and set of objectives for the business – which they can then easily and clearly share with the rest of the organization.
Management engagement
Current state analysis
Balanced Scorecard design and strategy alignment
Communicate the strategy -Organizational engagement
Embedding the Balanced Scorecard -Monitor, maintain and manage
Steps in Balanced Scorecard implementation
Communicate the strategy – Organizational engagement
Cascading and Department Integration Identify Departments for Cascading Balanced Scorecard Education Indicator Selection and Target Setting Scorecards Linked into Department
Meetings
Embedding the Balanced Scorecard -Monitor, maintain and manage
Update the Strategic Plan using the Scorecard
Link the Budget to the Scorecard Link Performance Evaluations to the
Scorecard Link Compensation to the Scorecard
Balanced Scorecard designand strategy alignment
First Report, Targets and Initiatives
Review and Approve First Scorecard Report
Link Initiatives to Strategy Map Implement “Strategy Focused”
Management Agenda
Management engagement Process Owners Identified Management Agenda
Design Identify purpose and
objectives for Balanced Scorecard implementation
Current state analysis Assess the company
reality Identify tools and
instruments for performance management
Create an analysis report to start with
Steps in Balanced Scorecard implementation
Step2
Step1
Step3
Step4
Step5
Some Critical Success Factors / Best Practices for implementation in SMEs
Clear scope definition & plan implementation in phases. Top Management support & leadership. Educating the employees about the importance of Balanced
Scorecard and its impact on the organization and themselves. Making BSC a part of Strategy and conducting monthly review
meetings. Committed team with a good Coordinator. Reward points for successfully implementing the initiative.
The path
The premises
Benefits of Balanced Scorecard
Balanced Scorecard in SMEs
Limitations
Balance Point
Conclusion
Limitations in implementation and use of Balanced Scorecard in SMEs
Antrepreneurial orientation
Focus on sales and extensive growth
Feedback is received immediately
Strategy vs execution
Change management
The path
The premises
Benefits of Balanced Scorecard
Balanced Scorecard in SMEs
Limitations
Balance Point
Conclusion
Which is the point from where using a Balanced Scorecard tool becomes truly useful in SMEs?
Shift from the “antrepreneurial” stage to the “corporate”
stage
Growth requires efficiency
Execution does not follow strategy
Many branch / business units
Does not do the right things right
Usage
Small organizations will find that a well-designed, well-implemented balanced scorecard presents a powerful snapshot of their organization and its goals to outside sources – potential investors, banks, and so on.
Where the large organization can point to huge turnovers, glib shareholder presentations and powerful brand valuations, the SME can compensate with a plan shared by management, employees and external stakeholders to drive success.
The path
The premises
Benefits of Balanced Scorecard
Balanced Scorecard in SMEs
Limitations
Balance Point
Conclusion
Conclusion
In SMEs, the Balanced Scorecard benefits can be achieved without the need for developing a complicated and administratively demanding measurement regime by simply using the measures as a mental or verbal frame of reference for addressing strategic and operational change issues, resulting from the pursuit of long-term goals.
Conclusion
Successful Balanced Scorecard implementation in SMEs, as in any organization, requires sustained management commitment to using it, making sure it drives the necessary behavioral changes within the organization, starting with the managers themselves.
Conclusion
There is undoubtedly a place for the balanced scorecard in the SMEs business strategy – and the possibility that the balanced scorecard might be even more influential for the SMEs than it is for the large corporations.
Questions
For more information or questions, please contact us!
www.acumenintegrat.com
