Balanced Scorecard Usage Survey 2015

Summary of Findings

Copyright © 2GC Limited 2016

Balanced Scorecard Usage Survey 2015 • Summary of Findings

2GC.eu

About 2GC2GC is a strategic management consultancy with particular experience in implementing the latest generation Balanced Scorecards. With a global client list, 2GC are focused on helping organisations across every sector, with issues related to Performance Management, Performance Improvement,Employee Engagement and Strategic Execution/Management.

Based in the UK, with offices in France and Bahrain, the 2GC team applies its energies in four areas:

• Working closely with senior management teams to articulate strategic priorities and implement reporting tools to help them control the delivery of these strategies;

• Reviewing pre-existing performance management processes and systems to identify required improvements;

• Delivering training on the design and application of Strategic Execution methods including the Balanced Scorecard at introductory and advanced levels;

• Conducting research into Strategic Management topics in order to continually improve the 2GC service offering. 2GC staff regularly publish and present papers based on this research activity.

2GC is known as a leading expert on the use of Balanced Scorecard methods for strategic execution purposes, and has a particularly strong reputation concerning the design and implementation of Balanced Scorecard 'cascades'. 2GC's track record includes delivery of all sizes of projects for clients in private, public, Governmental and NGO sectors.

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Copyright © 2GC Limited 2016

Balanced Scorecard Usage Survey 2015 • Summary of Findings

2GC.eu

Why conduct a survey?The Balanced Scorecard is one of the world’s top-ten management frameworks and is the number one framework for Performance Management. This has been the case since its introduction in the early 1990’s. Despite this popularity, little is known about which organisations use Balanced Scorecard, what they use it for, and how useful it is in practice.

This survey is part of a multi-year 2GC and Intrafocus project to find answers to these questions in order to improve the use and understanding of the Balanced Scorecard and also help us do our work better.

Who participated? Well informed managers, in corporate or staff roles: a profile that helps us have confidence in the quality of responses provided.

• 21% declared they were extremely knowledgeable concerning the Balanced Scorecard - 46% said they were very knowledgeable.

• Over 70% worked in the headquarters of their organisation, 8% were in a Division and 7% in a Functional role.

How did the survey work? The 2015 questionnaire had an additional question relating to the number of objectives, measures and targets that were set, but otherwise was the same as 2014. The survey was made available via a web-based tool. Respondents were self selecting and 101 organisations participated.

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Balanced Scorecard Usage Survey 2015 • Summary of Findings

2GC.eu

Who uses the Balanced Scorecard?• 72% reported that their Balanced

Scorecards are used by Executive or Senior Management teams. Departmental Managers are the next most common user group.

• Respondents came from over 34 countries. There was greater representation from Africa and the Far East this year.

• As last year over 50% of respondents’ organisations had less than 500 employees.

Is this what we would expect? Yes. It is good to see that the majority of users are executives and senior managers, as the most effective Balanced Scorecards are built by the management team in alignment with the organisational strategy. The survey shows that Balanced Scorecards are much more common in larger organisations - over 40% of survey responses were from organisations with more than 500 employees, even a recent study found that fewer than 1% of all organisations have more than 250 employees.

Is this different from the last survey? Not really. This year we had an increase in responses from organisations with 1,001-5,000 employees, from countries outside Europe and from organisations reporting use of Balanced Scorecard at Divisional level. But despite these changes, the broad pattern of use remains similar to that seen in previous surveys.

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Geographic Distribution

Middle East 13%

Indian sub-continent 2%

Asia inc Aus. 13%

Africa 15%

Americas 15%

EU 40%

Reported role of users of the Balanced Scorecard

33%

34%

35%

45%

72%Executive/ Senior Manager

Department

Board

Function

Division

>10,000 6%5,001-10,000

4%

1,001-5,000 20%

501-1,000 13%

<500 57%

Organisation size by employee numbers

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Balanced Scorecard Usage Survey 2015 • Summary of Findings

2GC.eu

What are Balanced Scorecards being used for?• Balanced Scorecard’s primary role

continues to be in managing implementation of strategy and reporting on progress of such implementation activities.

• Balanced Scorecard drives organisational performance by influencing the business actions and behaviours of managers and individuals.

• Balanced Scorecard plays a role in individual and team rewards for approximately a third of respondents.

Are things different from the last survey? Yes. This year sees increases in the use of Balanced Scorecard for strategic management and Incentive calculations, and a significant fall in the number of organisations reporting use of Balanced Scorecard for operational uses.

Is this what we would expect? Yes. Increased focus on strategic management is consistent with the trend we see for the Balanced Scorecard methodology to be a key element in organisations’ strategy execution.

Balanced Scorecard - An Active Management tool... Over 80% of respondents use their Balanced Scorecard to influence Business Actions - a highly encouraging figure that shows the dynamic nature of the tool.

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Business Actions

Behaviours

Appraisals

Individual Rewards

Team Rewards

None5%

31%

35%

37%

44%

83%

2015 2014

What is influenced by Balanced Scorecard in your Organisation?

Strategic Management

Operational Management

Reporting ONLY

Calculate Incentives

22%

24%

43%

71%

2015 2014

Uses of Balanced Scorecard

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Balanced Scorecard Usage Survey 2015 • Summary of Findings

2GC.eu

How are Balanced Scorecards reported?• Balanced Scorecards work by informing

and improving decision making, so it makes sense to report and review them frequently. It is encouraging therefore that 67% report Balanced Scorecards being used on a quarterly basis or more often. It is hard to see how the 33% who using their Balanced Scorecards less often will get full value from their investment. A Balanced Scorecard works by influencing business actions and behaviours - if it is not reviewed, it is hard to have such influence.

• 7 out of 10 organisations use some kind of traffic light reporting

• Less than half of organisations reported any consequences being linked to missed targets.

• Office software tools, such as MS Excel, remain the most used software.

• The most common specialist software used is Quickscore.

• A surprisingly high number (39%) of respondents do not even use office software to report their Balanced Scorecard.

Are things different from the last survey? A greater proportion are reporting annually than previously. This year a higher number of respondents said that there were no consequences for missing targets - at 53% (50% in 2014).

Is this what we would expect? No! Six monthly or annual reporting is not a good basis for effective strategy implementation and if there are no consequences for missing objectives and targets then it will not be effective. But this finding does reveal an opportunity - with a few adjustments most organisations would see better returns on their investment. Introducing software automation could be a good way to ensure more frequent reporting and trigger the changes that would lead to consequences being tied to Balanced Scorecard performance.

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Monthly/more often

Quarterly

Six-monthly

Annual25%

9%

25%

42%

2015 2014

Reporting Frequency

Reporting Software

None 39%

Bespoke 9%

Specialist e.g. Quickscore 18%

Office Software 34%

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Balanced Scorecard Usage Survey 2015 • Summary of Findings

2GC.eu

Which Balanced Scorecard design is in use?This year 61% of respondents indicated their Balanced Scorecard featured elements specific to the more objective focused 2nd or 3rd Generation designs.

• Organisations reported using between 2 and 6 perspectives (average 4). Many used unique names for some perspectives, and common names for others.

• The graph on the far right shows the frequency of perspective names. Many more organisations than last year are using the ‘standard’ perspective names particularly the Financial, Customer (or similar) and Internal Process (or similar).

• In line with previous years the reported Balanced Scorecards had on average 15 Objectives and 20 initiatives. Unusually both numbers of Metrics and Targets have fallen this year to 30 Metrics (38 in 2014) and 24 targets (40 in 2014).

Is this what we would expect? Yes. We are particularly pleased to see continued high levels of Strategic Balanced Scorecards where both a Strategy Map and a Destination Statement were used in design of the Balanced Scorecard content.

Users, consultants and academics have all proposed changes to the number of, and names used for, perspectives, but the original four headings remain dominant - though the names are “personalised” according to the nature of the organisation using the Balanced Scorecard. This year we had fewer perspective names of a one-off nature.

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1st Generation 39%

2nd Generation 36%

3rd Generation 25%

Perspective Names

4%

10%

18%

54%

82%

82%

92%Financial

Customer or similar

Internal Process or similar

Learning & Growth or similar

Organisational Capability or similar

Corporate Social Responsibility

or similar

Stakeholders or similar

Perspective names that were reported only once have been excluded from

this graph to aid clarity

Types of Balanced Scorecard

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Balanced Scorecard Usage Survey 2015 • Summary of Findings

2GC.eu

How many and how were they designed?• 63% of respondents reported that their

organisation has multiple Balanced Scorecards in use and 61% of these were created using a sequential approach known as cascading.

• A large majority of balanced scorecards are now designed internally. In our view this is a positive step, as objectives and targets will be jointly agreed and acted upon. The proportion of those designed solely by consultants has increased slightly.

• There has been a steady increase in organisations reporting multiple balanced scorecards over the last few years.

• Just over half of organisations have refreshed their Balanced Scorecard design: most during the previous 12 months. 67% of the revisions were linked to updated Strategic Plans - a big increase over last year (49%). 71% of the revisions involved changes to objectives, measures and targets, which is the favoured approach.

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Has it been reset?

46%

54%

When was it last reset?

18%

82%

Objectives, Measures & Targets

71%Targets only

4%

Measures & Targets

25%

Other 3%

Management Team Itself

38%

Joint Internal Team/Consultants

34%

Others in Organisation

18%

Consultants 7%

34%

44%

63%

Which elements where changed? Who designed the Balanced Scorecard?

Yes

No

Over 12 months ago

Within last year

2015

2014

2013

Proportion of responding organisations reporting having multiple Balanced Scorecards

Copyright © 2GC Limited 2016

Balanced Scorecard Usage Survey 2015 • Summary of Findings

2GC.eu

Realising the value of Balanced ScorecardTwo thirds of respondents said that their Balanced Scorecard was extremely or very useful.

Responses regarding ‘Which Department manages the Balanced Scorecards’ shows the Unit using, i.e. self-managing, and then Specific PM Unit are the most common choices. Dedicated PM units appear less popular this year, perhaps reflecting the changes we are seeing towards Balanced Scorecards becoming more of a strategic activity.

A high proportion of organisations link their Balanced Scorecards to Planning and Budgeting. Almost half also link them to Personal Goal setting and Quality.

Is this what we would expect? Yes, we know the tool can add value to many organisations if well used. We would also expect a high involvement from Strategic Planning, reflecting the increased focus on strategic management seen in other parts of this year’s survey.

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Extremely

Very

Somewhat

Not at all

4%

27%

29%

38%

2%

25%

46%

27%

3%

31%

46%

21%

2015 2014 2013

How valuable is your Balanced Scorecard?

Unit usingBalancedScorecard

28%

Others 10%

Quality Management

10%

HR 7%

Finance 4%

Specific PM Unit 25%

Strategic Planning 16%

Who manages the Balanced Scorecard?

2%

28%

29%

48%

48%

58%

60%

Processes linked to the Balanced Scorecard

Planning

Budgeting

Quality

Goal Setting

Pay / Rewards

Risk Management

Other

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Balanced Scorecard Usage Survey 2015 • Summary of Findings

2GC.eu

Conclusions and ObservationsThis year, thanks in particular to our continuing co-operation with Intrafocus, a specialist Balanced Scorecard software and reporting expert - we have been able to increase the penetration of the survey with more smaller organisations and across European Union.

As last year, the survey shows that Balanced Scorecard is a valuable management tool used for both strategic and operational management purposes. This year, our survey finds that a typical Balanced Scorecard has 15 objectives and 30 measures, is based on the strategy of the organisation, is typically one of several Balanced Scorecards within the organisation, and is directly influencing managers’ actions and behaviours.

We see that organisations are linking their Balanced Scorecard to planning, budgeting, goal setting and increasingly quality management - the challenge is to do this seamlessly and without adding unnecessary complexity.

Excel is still the most common tool used to report Balanced Scorecard results. To help these users do a good job of reporting, 2GC and Intrafocus have produced a most useful Excel Spreadsheet and Guide. For more advanced users, Intrafocus’ Quickscore software is widely used and certainly worth considering. Find out more about both by visiting the Intrafocus website - intrafocus.com.

Overall, the survey shows that Balanced Scorecard remains an important and effective management tool, one whose value relies on sponsorship by senior managers, full implementation and regular review of results to achieve the expected benefits.

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Find out moreRead some material See 2GC’s and/or Intrafocus’s collection of FAQs, Papers, Presentations, Case Studies• 2gc.eu/resources

• intrafocus.com/resources/

Get some training 2GC runs one-day and two-day training courses on Balanced Scorecard design and implementation throughout the year• 2gc.eu/training

Ask us a question We will send you an answer for free (if we know the answer!).• Send an email to info@2GC.eu• No coursework questions please...

Use this material If you are interested in using this material then please email survey@2GC.eu.