Balanced Scorecard implementation in SMEs: From theory to practice

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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

  1. 1. International Conference Business Excellence<br />16 - 17 of October 2009<br />Balanced Scorecard implementation in SMEs: <br />from theory to practice <br />
  2. 2. About us<br />Acumen Integratis 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.<br />
  3. 3. Balanced Scorecard implementation in SMEs:From theory to practice<br />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.<br />
  4. 4. The path<br />The premises<br />Benefits of Balanced Scorecard<br />Balanced Scorecard in SMEs<br />Limitations<br />Balance Point<br />Conclusion<br />
  5. 5. No matter the size and industry, every organization wants to achieve performance, and strives to find new and better ways for this purpose. <br />Organizations aim for:<br />
  6. 6. Star<br />Processes<br />Employees<br />Resources<br />
  7. 7. Star<br />Company<br />
  8. 8. Performing company<br />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?<br />
  9. 9. Performing company<br />One way to increase the performance of a company is to use business tools, like Balanced Scorecard.<br />
  10. 10. The path<br />The premises<br />Benefits of Balanced Scorecard<br />Balanced Scorecard in SMEs<br />Limitations<br />Balance Point<br />Conclusion<br />
  11. 11. A clear sense of direction<br />Source: “Dilbert - A Treasury Of Sunday Strips: Version 00” by Scott Adams, (Andrews McMeel Publishing 2000)<br />
  12. 12. An ability to focus and prioritize<br />
  13. 13. Organizational agility<br />Management teams need systems that are simple and easy to use. <br />With Balanced Scorecard this aspect can be achieved, so the organization will not have to deal with formulas or graphs like these.<br />
  14. 14. A profound understanding of the business model<br />
  15. 15. A profound understanding of the business model<br />
  16. 16. The path<br />The premises<br />Benefits of Balanced Scorecard<br />Balanced Scorecard in SMEs<br />Limitations<br />Balance Point<br />Conclusion<br />
  17. 17. Balanced Scorecard in SMEs<br />Small business should think about Balanced Scorecard in a different way than large-sized corporations do.<br />
  18. 18. Balanced Scorecard in SMEs<br /><ul><li>Low degree of formality needed to monitor
  19. 19. Quicker and easier re-prioritization
  20. 20. No expensive administrative procedures
  21. 21. Fewer time to act upon the Balanced Scorecard measurement</li></ul>Less complexity and fewer people generally speeds up the process in SMEs, and changes are much more easier to be managed.<br />
  22. 22. Balanced Scorecardin SMEs<br />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.<br />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.<br />
  23. 23. Steps in Balanced Scorecard implementation<br />
  24. 24. Steps in Balanced Scorecard implementation<br />Management engagement<br /><ul><li>Process Owners Identified
  25. 25. Management Agenda Design
  26. 26. Identify purpose and objectives for Balanced Scorecard implementation</li></ul>Current state analysis <br /><ul><li>Assess the company reality
  27. 27. Identify tools and instruments for performance management
  28. 28. Create an analysis report to start with</li></ul>Step<br />2<br />Step<br />1<br />Step<br />3<br />Step<br />4<br />Step<br />5<br />Balanced Scorecard design<br /> andstrategy alignment<br /><ul><li>First Report, Targets and Initiatives
  29. 29. Review and Approve First Scorecard Report
  30. 30. Link Initiatives to Strategy Map
  31. 31. Implement “Strategy Focused” Management Agenda</li></ul>Communicate the strategy – <br /> Organizational engagement<br /><ul><li>Cascading and Department Integration
  32. 32. Identify Departments for Cascading
  33. 33. Balanced Scorecard Education
  34. 34. Indicator Selection and Target Setting
  35. 35. Scorecards Linked into Department Meetings</li></ul>Embedding the Balanced Scorecard -<br /> Monitor, maintain and manage <br /><ul><li>Update the Strategic Plan using the Scorecard
  36. 36. Link the Budget to the Scorecard
  37. 37. Link Performance Evaluations to the Scorecard
  38. 38. Link Compensation to the Scorecard</li></li></ul><li>Some Critical Success Factors/Best Practices for implementation in SMEs<br /><ul><li>Clear scope definition & plan implementation in phases.
  39. 39. Top Management support & leadership.
  40. 40. Educating the employees about the importance of Balanced Scorecard and its impact on the organization and themselves.
  41. 41. Making BSC a part of Strategy and conducting monthly review meetings.
  42. 42. Committed team with a good Coordinator.
  43. 43. Reward points for successfully implementing the initiative.</li></li></ul><li>The path<br />The premises<br />Benefits of Balanced Scorecard<br />Balanced Scorecard in SMEs<br />Limitations<br />Balance Point<br />Conclusion<br />
  44. 44. Limitations in implementation and use of Balanced Scorecard in SMEs<br /><ul><li>Antrepreneurial orientation
  45. 45. Focus on sales and extensive growth
  46. 46. Feedback is received immediately
  47. 47. Strategy vs execution
  48. 48. Change management</li></li></ul><li>The path<br />The premises<br />Benefits of Balanced Scorecard<br />Balanced Scorecard in SMEs<br />Limitations<br />Balance Point<br />Conclusion<br />
  49. 49. Which is the point from where using a Balanced Scorecard tool becomes truly useful in SMEs?<br /><ul><li>Shift from the “antrepreneurial” stage to the “corporate” stage
  50. 50. Growth requires efficiency
  51. 51. Execution does not follow strategy
  52. 52. Many branch / business units
  53. 53. Does not do the right things right</li></li></ul><li>Usage<br />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. <br />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.<br />
  54. 54. The path<br />The premises<br />Benefits of Balanced Scorecard<br />Balanced Scorecard in SMEs<br />Limitations<br />Balance Point<br />Conclusion<br />
  55. 55. Conclusion<br />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.<br />
  56. 56. Conclusion<br />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.<br />
  57. 57. Conclusion<br />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.<br />
  58. 58. Questions<br />
  59. 59. For more information or questions, please contact us!<br />www.acumenintegrat.com<br />

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