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Bringing
the Balanced Scorecard to Manila
By Michael Alan Hamlin
June 17, 2002
Globalization, liberalization, and
residual fallout from the 1997 financial crisis - such as increased
pressure for transparency and sound corporate governance - have
companies everywhere looking for ways to increase efficiency, boost
productivity, and grow the bottom line. Asian companies, many facing
true competition for the first time, are thinking seriously about
competitive business strategy, new sources of profitability, and
the adaptability of business models in response to quickly, and
ever-, changing market conditions.
That's probably why response to a series of workshops
by Robert S. Kaplan has been overwhelming across the region. Kaplan
is the Harvard Business School professor known as the father - along
with co-author David P. Norton - of the Balanced Scorecard. The
Balanced Scorecard, aside from being the title of a book, is a framework
for developing, implementing, and evaluating strategic plans. Kaplan
is also the developer of what is considered Harvard's best new executive
program, "Driving Corporate Performance: From Scorekeeping
to Strategy."
In Hong Kong, Kaplan speaks today to close to 350 top
executives of multinationals, local family-owned conglomerates,
and entrepreneurships looking to professionalize and adopt a focus
on profitability, not just growth. His presentation in Kuala Lumpur
Thursday will be before better than 500 executives. Here in Manila,
Kaplan is being presented as the keynote speaker in the Management
Association of the Philippines' International CEO Conference, "Defining
the New Asian Corporation: Its Leadership, Character, & Passion."
The conference, which takes place Wednesday (June 19)
at the Makati Shangri-La Hotel, is being co-presented by BayanTrade
(Full Disclosure: My firm is organizing the conference, and BayanTrade
is a client.). So far, about 250 executives - very senior executives,
as a matter of fact - are expected to attend the full conference,
and indications are that this number will continue to grow.
Kaplan will speak in two sessions on "Building
Strategy-Focused Organizations with the Balanced Scorecard."
The first session, at 9:00 am, is entitled "Translating Mission
& Strategy into the Balanced Scorecard." Among the topics
to be discussed in this first session are the role of strategy,
vision, and mission as top tools for senior executives; the gap
between strategy, vision, and mission and everyday employee behavior;
and, using the Balanced Scorecard to implement strategies quickly
and effectively.
According to a recent survey of effective management
tools, Kaplan says that 76 percent of 451 senior executives in 30
industries identified strategic planning as a core tool for managing
their organizations. Seventy percent said that vision and mission
statements played important roles in unifying their organizations
and focusing employees on goals. Ironically, he notes that less
than 10 percent of corporate strategies "effectively formulated
are effectively executed."
Kaplan sites other evidence suggesting that when executives
and organizations fail in 70 percent of these cases the strategies
themselves were excellent. The downfall was implementation. The
Balanced Scorecard, he says, shows how good strategy can be effectively
implemented. And his presentation includes case studies from among
thousands of companies in which The Balanced Scorecard has made
the difference in effectively implementing sound strategies.
It follows then that Kaplan's second session will focus
on implementing and managing strategy. Kaplan first shows how the
Balanced Scorecard is used to align and integrate decentralized
business units that sell products and services to external customers.
Next, he demonstrates how organizations can create synergies by
aligning their internal units that provide shared services, or what
used to be known as support services provided by corporate staff.
For example, "If a corporate role is to "create
a common brand and a common shopping experience for the customer,
a central marketing group can facilitate these objectives."
Or, an IT group may provide economy of scale across different operating
divisions. Similarly, "companies that want to leverage innovation
may establish a single R&D division to supply new product and
process technologies to its individual operating groups."
In theory, that sounds great. The challenge, Kaplan
says, "is for the centrally supplied service to be responsive
to the strategies and needs of the business units it purports to
serve." Too often, shared services end up being bureaucratic
and unresponsive, frustrating operating units and booby trapping
strategy. One way to deal with that is to outsource services. Another
is build strategic partnerships within the organization.
Doing that requires four components, according to Kaplan.
First, a formal agreement between strategic business units (SBU)
and shared services units (SSU) should be developed that explicitly
defines expectations about services and costs, the same as the company
would do with any supplier of products and services. Next, shared
service unit scorecards are developed by SSUs that reflect their
strategies to support the service agreements. Third, the SSUs develop
linkage scorecards in which they accept accountability for improving
selected measures on the SBU scorecards. Finally, SSUs should receive
periodic feedback from SBUs about actual performance.
To find out what's in those scorecards, join us Wednesday
for the conference. Email Aivie Cabato at gfcabato@teamasia.com
to reserve a place. And better do it now, while you're thinking
about it.
(Michael Alan Hamlin is the managing director of consultancy
TeamAsia and the author of three books on Asian economies and companies.
His latest book is Marketing Asian Places, of which he is co-author.
His e-mail address is mahamlin@teamasia.com)
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