The Balanced Scorecard has become a widely used strategy and performance management tool. But I have a problem with it, which is that it is, well, too balanced. It makes everything of equal importance. That’s fine, perhaps, when you’re managing ongoing operations, but is simply confusing when you’re setting a future direction.
A strategy is only relevant when it has a clear goal that it is seeking to achieve. Your first step, as a business leader, is therefore to establish a clear, unequivocal #1 goal for your team, department or organisation. I don’t mean a short-list of five or six goals; I mean your single most important goal.
When Churchill first became prime minister, for example, he didn’t say his top aims were to do as well as could reasonably be expected in WW2, deliver a balanced budget, improve education, introduce a new health system and build better housing. No, Churchill said, “You ask, what is our aim? I can answer in one word: Victory – victory at all costs, victory in spite of all terror, victory however long and hard the road may be; for without victory there is no survival.”
Translating this idea to the corporate world, five or six years ago, BSkyB set itself a clear, unambiguous #1 goal: to have 10 million subscribers by 2010. Achieving this goal required the company to add four million new subscribers and reduce the loss of existing subscribers. All of the company’s initiatives – sales teams in shopping malls, HD and 3D TV innovations, and integrating its TV, phone and broadband services – were focused on achieving that goal. And, in November 2010, perhaps unsurprisingly, Sky reached its target.
When I work with my clients we determine what their #1 goal is, and use that goal to drive our agenda and strategy. We then identify other KPIs to counter-balance our goal and make sure that it is delivered in the right way. Critically, however, we don’t give everything equal weighting: we don’t create a ‘balanced scorecard’.
There are three questions you need to answer to establish your #1 goal:
- What is the best metric to use? Although many executive teams default to a profit target, this can be hard to share across an organisation. There are other options available, including a sales goal, customer numbers (as with Sky), total size or market share, and productivity. The important thing is to link your goal to your business model. If, like Sky, customer numbers drive performance then focus on customer numbers. If, however, market scale is critical to your success, focus on your market position, as GE did in the 1980s, when the CEO, Jack Welch, demanded that all the group’s business units had to be number one or two in their market.
- What level of ambition should you set? Setting goals is an art as much as a science. The best goals are grounded in an understanding of what is achievable or possible for a business, but include sufficient stretch that new solutions, new growth and new behaviours are required to achieve them. When JFK said that the US should put a man on the moon before the end of the 1960s he did so on an understanding of the technological progress that NASA had already made (i.e. he knew that the goal was certainly possible), but he also knew that his country would need to commit further to make it happen.
- What time frame should you set for achieving the goal? There is, of course, a link between the time frame you set and the scale of your ambition. Simply put, bigger ambitions take longer to realize. I have found, though, that for most executive teams a 3-5 year period gives enough time to make big changes, but is also sufficiently brief for the team to realise that they must get going immediately and cannot procrastinate. After all, they may still be around to face the music at the end of the goal period!
Don’t be balanced, be focused. Once you clarify, communicate and commit to your top goal you will find that everything else will start to align around it.
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