2GC Papers

Evolution of the 3rd Generation Balanced Scorecard

This paper describes the changes to the definition of the Balanced Scorecard that have occurred since it became popular as a performance measurement framework during the early 1990s. The paper builds on earlier work by 2GC to characterise development of the Balanced Scorecard concept across three distinct generations of thinking. This paper shows that these developments reflect established thinking concerning strategic management within organisations, and that these changes have improved the utility of Balanced Scorecard as a strategic management tool. The paper concludes that Balanced Scorecard designs need to accommodate organisational and information flow issues, and reflect the strategic control processes used by the organisation if they are to minimise risk of failure, and avoid becoming merely elaborate performance reporting systems as opposed to effective strategic management systems. Also available is the earlier (2002) version of the working paper.

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Classification of Balanced Scorecard Designs based on intended use

It is difficult to interpret the impressive survey based adoption statistics for the Balanced Scorecard without being clear on how the term was both defined and understood by those participating in the survey. In practice, it appears, there are wide variations in understanding between organisations.

This paper describes a classification of Balanced Scorecard designs based upon intended method of use within an organisation. The paper describes how Balanced Scorecard can be used to support two distinct management activities, management control and strategic control, and asserts that due to differences in the performance data requirements of these applications, planned use should influence the type Balanced Scorecard design adopted. The paper describes characteristics of Balanced Scorecards appropriate for each purpose, and suggests a framework to help select between them.

Working Paper: Classification Of Balanced Scorecards Based On Their Effectiveness As Strategic Control Or Management Control Tools

The BSC as a Communication Protocol in Organisations

The Balanced Scorecard is commonly associated with the area of performance measurement. However the Scorecard framework, and the processes associated with Scorecard design are more fundamentally concerned with communication and articulation of strategy at operational levels. This role for the Balanced Scorecard, specifically the use of the Scorecard to communicate operations strategy across intra-organisational borders is the subject of this paper. Research carried out in a multi-divisional organisation will be presented. The research shows how a modified Scorecard design process allows firms to nationalise strategic communication so that only strategically relevant information is transmitted in the design of the Strategic Control system.

Conference Paper: The BSC as a communication protocol for managing across intra-organisational borders

Organisational performance management in a UK Insurance firm

This paper explores two issues related to the performance management of individuals: the need for a personal goal setting process that is effective in changing individual behaviour, and; for this process to be aligned with business strategy at each level of the organisation. Performance management tools such as the Balanced Scorecard are frequently prescribed as devices that address both concerns. However, perhaps because they are based on the premise of rigid, top-down control, implementation is not always successful.

The paper critically appraises an attempt to address these issues via implementation of a new performance management approach. The approach, based on the 3rd Generation Balanced Scorecard was implemented in a small UK subsidiary of a large Japanese insurance company. The post project analysis is used to discuss how performance management might be used to forge a link between individual and corporate goals. In addition, it forms the basis for an assessment of future areas of research.

The paper reports findings in three main areas:

1. The use of locally relevant content in the setting of objectives; rather than a traditional directive “top-down” objective setting process.
2. The use of a range of management processes to set objectives, each appropriate to the different levels of the organisation to produce a flexible, simple and efficient system of control.
3. The need for, and means of achieving process contiguity between HR and Business Strategy.

Conference Paper: Organisational performance management in a UK Insurance firm

Related Case Study: IIC - Aligning individuals’ goals with the business strategy

Balanced Scorecard Implementation in SME's

Recent research has indicated that the degree of strategic planning in organisations is likely to have a direct impact on business performance and business evaluation. However, these findings leave small and medium-sized businesses (SMEs) in particular, with the challenge of matching the requirement for an improved strategic planning processes with the competitive advantage associated with being a "simple" and highly responsive organisation. This paper was thoroughly updated in 2007 to reflect changes in performance management theory and practice since 2001, and to include additional case-based examples to illustrate the points discussed.

Working Paper: Balanced Scorecard Implementation in SMEs: reflection on literature and practice

Presentation Slides: Balanced Scorecard Implementation in SMEs: reflection on literature and practice

Performance management system design in a devolved organisation

This paper is a case study exploring the design of a new performance management system for the UK Environment Agency (11,000 staff, more than 40 discrete management units). The approach adopted was based on best practice 3rd Generation Balanced Scorecard processes and lead to the creation of a total of 44 unique but strategically aligned Balanced Scorecards across the organisation - one of the most complex strategic alignment exercises of this type ever undertaken or reported about in this way. This paper, written jointly by staff from 2GC and the Environment Agency, explores the agency’s rationale for undertaking a redesign of its performance management systems, and how the design approach adopted is compatible with needs of the organisation’s devolved business units. The paper reports that the experience to date has been positive, and concludes with recommendations on future areas of research and ways to approach the issue of measure selection and use within complex devolved organisations.

Research Paper: Performance management system design in a devolved organisation

Risk Management and Performance Management

Without a doubt, 'risk management' is topical. The events of the last few years have made improved corporate governance a high priority, driving boards to implement new risk management solutions. But is risk management really such a new management activity? This paper looks at the similarities between risk management and strategic performance management, both from a design and usage perspective. Examining the existing literature on the topic, as well as a case study from a public sector organisation, the paper proposes an approach to efficiently integrate risk and performance management processes.

Conference Paper: Integrating Risk Management with Strategic Control

Working Paper: Risk Management and Performance Management

In June 2004, Gavin Lawrie gave a web-seminar on this topic in conjunction with BetterManagement.com - the slide pack used is available via the link below. An archived copy of this presentation can be obtained from the BetterManagement.com web site.

Web Seminar Slides: Integrating Risk and Performance Management

Archived Web Seminar: Integrating Risk and Performance Management

Realising Strategic Success

In a survey of over 200 companies in the Times 1000 it was found that while almost all reported having a 'strategic vision', only one in three reported achieving 'significant strategic success'. This article explores some of the reasons that might explain why so many companies struggle to achieve their strategic vision. It concludes that for many the answer lies in the quality of the strategic management processes used.

Working Paper: Why do only one third of UK companies realise significant strategic success?

Presentation slides: Why do only 1/3 of UK companies realise strategic success?

Improving public sector governance through better strategic management

Following years of management reform, strategic management has recently become an imperative in public sector. This paper presents research on the application of the Balanced Scorecard and associated management processes for strategic control purposes in a public sector environment. It shows how an improved Balanced Scorecard design has the potential to enhance strategic management and public sector governance. The strong similarity between the proposed approach and proven analogous designs as applied in the commercial sector, suggest that the added utility derives simply from encouraging better general management behaviours.

Working Paper: Improving Public Sector Governance through better Strategic Management

Conference Paper: Examining opportunities for improving public sector governance through better strategic management

Balanced Scorecard and Results-Based Management: Convergent Performance Management Systems

This paper compares and contrasts two of the most widely adopted Performance Management (PM) frameworks – Balanced Scorecard and Results-Based Management.  It reviews the two frameworks’ independent origins and separate evolutionary paths, and examines the resulting differences in practical application.  Two case studies are presented, one examining Results-Based Management implementation within a global UN agency, the other describing work to build a 3rd Generation Balanced Scorecard within a Middle Eastern government ministry.  The authors propose that the two frameworks are converging in terms of the approaches used for framework design and implementation.

This paper was presented at 3rd Annual Conference on Performance Measurement and Management Control, The European Institute for Advanced Studies in Management (EIASM), Nice, France, September 2005

Conference Paper: Balanced Scorecard and Results-Based Management: Convergent Performance Management Systems

Selecting Measures of Intellectual Capital

Intellectual capital measures must have relevance to the organisation to which they relate, such relevance being obtained through linking intellectual capital measures to strategy. Literature on intellectual capital frequently advocates the route to strategic linkage through the use of taxonomies, however such taxonomies can lead to the selection of generic measures that may lack local relevance. This paper describes a process for the selection of relevant measures of intellectual capital. A key attribute of the process is its provision of an explicit method to link strategy to measure selection.

Conference Paper: A process for developing strategically relevant measures of Intellectual Capital

Working Paper: Developing Strategically Relevant Measures Of Intellectual Capital

The Balanced Scorecard & EVA

We have recently re-written and updated this popular paper which discusses the potential to combine use of EVA measures of organisational performance with the use of the Balanced Scorecard approach to managing strategic management behaviours. It briefly outlines how the two tools are defined, considers their strengths and weaknesses, and then considers one approach for using the two tools together. Concerning EVA, the paper notes that it has advantages over other, accounting based, measures of financial performance and is highly compatible with the Balanced Scorecard approach to performance measurement and reporting, but has limitations when used to promote strategic alignment. Concerning Balanced Scorecard, the paper notes the strength of the framework as a tool to support strategic or operational management activity, but highlights its dependence on effective measure selection. The paper concludes that when EVA is used in conjunction with the Balanced Scorecard approach, the resulting hybrid tool can be a powerful basis for encouraging organisational change and performance improvement. The new version of this paper includes additional information about how EVA and Balanced Scorecard might combine in the same system, and reflects new knowledge and insights that have emerged since 2001 concerning both EVA and Balanced Scorecard use.

Working Paper: Combining EVA with the Balanced Scorecard to improve strategic focus and alignment

Presentation Slides: Combining EVA with the Balanced Scorecard

Enabling Quality Management

Since Western economies began to adopt Quality Management principles in the early 80s, it has been noted that Quality Management projects have produced limited long-term success when compared with equivalent initiatives in Japan, where Quality Management tools and processes were pioneered. Some argue that western practitioners and academics have overlooked a critical success factor – the need for an explicit link between strategy and operational initiatives: a link that also features in best practice performance management system design. Using case examples, this 2GC working paper discusses how performance management methods can efficiently provide this linkage and so enable improved application of Quality Management tools.

Working Paper: Enabling Quality Management

Discuss this paper in the 2GC Discussion Forum

The Balanced Scorecard vs. the EFQM Business Excellence Model

The Balanced Scorecard (BSC) and the EFQM's Business Excellence Model (BEM) are tools that use measures of an organisation's performance to drive organisational improvement - generally by highlighting current shortfalls in performance to management teams. Both have been widely adopted in recent years, are often assumed to address broadly similar issues, and benefit from the support of powerful advocates in the form of current users, consultants, and software suppliers. The BSC and BEM are often presented as broadly similar "alternatives". But, in this working paper we show that the two approaches come from very different backgrounds, and are designed and used using different processes. As part of our ongoing research into how organisations deal with issues of Strategic Control we have looked for independent evidence to support our experiential observations. The paper concludes that such evidence does exist - both in the academic and practitioner communities. These conclusions are supported by the related observation that many active users of the Business Excellence Model have chosen to adopt in parallel Balanced Scorecard as a tool for strategic management activity.

Working Paper: The BSC vs. EFQM Business Excellence Model - which is the better strategic management tool?

Presentation Slides: The Balanced Scorecard vs. the EFQM Business Excellence Model – which is the better strategic management tool?

Discuss this paper in the 2GC Discussion Forum