What do you use to evaluate the performance of your business?
- The results?
- The PER of the action?
- Customer satisfaction?
- The quality of products?
- Employee satisfaction?
The correct answer? There is not is a matter of choice. Must still make them, share them and stick!
I recently attended a seminar for chief financial officers and controllers on the theme of the implementation process of a Balanced Scorecard (BSC). If all participants were aware and convinced of the necessity of implementing such an approach, hence their presence, there was consensus to share a difficulty in some branches of membership in this process.
[The Balanced Scorecard can be defined as a tool to decline the strategic objectives into a set of operational actions and performance indicators. It plays a key role in operational management.]
This difficulty stems from membership in certain practices:
- A strategy deliberately not spread to the company
- a strategy often referred to in times of budgeting only
- A lack of alignment in the goals
- A focus on the past and the short-term
strategy deliberately not spread to the company
Fear of loss of confidentiality of the strategy was mentioned by some branches to restrict its communication to a few insiders.
It is not yet in the process of performance management to reveal the very sensitive areas of strategy, communication can be sanitized and disseminated in the underlying objectives. In all cases the strategy should be known by those involved in its implementation if it can find to do.
A strategy often mentioned during budget preparation only.
Unfortunately, we all see that the budget has little to do with strategy, it is actually, in most cases a year, very time allocation resources and management of the compromise between what the operational and proposed that ownership imposes.
Jack Welch, former chairman of General Electric sums it up thus: "people work for a month on their tables and their budget submissions for senior management to announce that given the economic environment and competitive situation the best they can do is 2. Branch said while their shareholders expect 4. We scored 3 in the budget and everyone goes home happy. " The purpose is not provocative but so full of reality.
In fact, regardless of the consensual aspect of the budget, the strategy is not always translated into targets on the budget and when it does, it is not often translated into financial and nonfinancial indicators linked by a causal link allowing the rationalization.
A lack of alignment in the goals
indicators exist in the company, each department makes it a point of honor to develop its own and to evaluate its performance according to criteria and priorities that are not necessarily in connection with the strategic objectives.
This brings us to develop a real Encyclopedia of indicators, sometimes jealously guarded by Devers itself and therefore not shared between departments or in checked their reliability until presented in "exclusive" to the next steering committee. Indicators that can be requested again by management to another service to ensure data consistency. And it happens more time to produce and control numbers and to analyze when there is time available, more time in analysis than in anticipation.
It reminds me that I had about read somewhere "the act of measuring does not create more value than the fact of being weighed does not lose weight! "
For the point is there, value creation is the common objective of any business. But the value is created only by the proper execution of policy decisions. Strategy without action is not a strategy. It is therefore introduce into the execution of the strategy measures of value creation and to communicate to the operational objectives in relation to the strategy.
Focusing on the past and the short-term
meetings to present the monthly report are part of the agenda of any CFO. All financial indicators are reviewed. Variances are analyzed and discussed in relation to monthly N-1, the cumulative N-1, NO monthly budget, budget accumulated N, "remains to be done" with respect to N "is to" N-1. From the second half we also introduces deviations from the "re-estimated." And if there's time for this meeting one or two non-financial indicators of the current period will be provided to indicate the trend of the next monthly reporting, and will there be shown to "advance".
Communication rationalization strategy, strategic alignment, consistency and anticipation are so many areas of improvement. Ie moving from a culture of reporting, accounting vision performance to that of the scoreboard oriented toward the future vision for future action.
In this cultural evolution CFO has an opportunity to take to strengthen its role as partner management. What do you think?
To go further on this subject I invite you to browse the blog Jaulent Patrick, President of Balanced Sorecard Europe
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