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