Good to Great and the Balanced Scorecard

A small independent community bank in Iowa, USA, has adopted the “Good to Great” framework developed by Jim Collins. They are struggling to build a Balanced Scorecard (BSC) that accommodates this framework.

“How could the Balanced Scorecard be aligned to Good to Great’s three components of Disciplined People, Disciplined Thought, and Disciplined Action?” Shane Tiernan, who leads strategic planning in this bank, visited my website. He e-mailed the question to me.

Fortunately, this alignment can be done fairly easily. The BSC framework can accommodate any theory.

Shane, in doing the alignment of the two frameworks, start with the Balanced Scorecard’s four perspectives. The two perspectives which deliver results by companies using the BSC are the Learning and Growth Perspective and the Internal Business Processes Perspective.  You and your team, in posing the question and in researching Good to Great and the BSC, are busy developing your Human Capital under the Learning and Growth Perspective.

All objectives that require disciplined action resort under the Learning and Growth Perspective and under the Internal Business Processes Perspective. Think smart and then work smart. The action parts of integrating the Good to Great framework into the BSC fit perfectly under these two perspectives.

The Financial and the Customer Perspectives are target oriented. Here you would measure the results of the disciplined action which you took under the first-mentioned two perspectives. The first two perspectives provide leading indicators while the last two provide lagging indicators. Take action and in due course you will see results.

•    Under the Financial Perspective you would measure results achieved against revenue growth and financial productivity targets. Under this perspective you would measure the ultimate financial impact of having made the Collins-developed principles part and parcel of your thinking and doing, of your planning and execution.

•    Under the Customer Perspective you would measure the acquisition, retention and satisfaction not only of your bank’s customers but also of your employees – and the right employees are more important than your customers. Here you do nothing but measure. Are matters improving?  (Your action objectives concerning your customers get attention under Customer Management Processes of the Internal Business Processes Perspective.)

To become great a company, your bank, needs disciplined people who think in a disciplined manner and who are capable of taking disciplined action. The entire BSC rest on the abilities of your people and therefore on the Learning and Growth Perspective, which concerns people and their ability to learn and grow.

•    Your bank would insert your planning objectives about recruiting and appointing disciplined people (who have specific strengths needed to execute your bank’s Strategic Plan, which incorporates your adoption of the Good to Great approach, and specific talents, knowledge and skills), and then developing and building your people under Human Capital of this perspective.

•    Under Information and Intellectual Capital you are obliged to conceive systems and obtain or develop applicable technology to be used by the people of your bank that will assist them in achieving greatness and recognition for themselves and for your bank. Of course, greatness must be in the eye of the beholder – your customers, stakeholders and shareholders.  (You would deliver smartly and measure their opinion about your bank under the Customer Perspective.)

•    Objectives about how you lead and motivate your people, how to create a great company culture (and a Fortune best company to work in) which embodies the principled thinking of Good to Great, would fall under Organisation Capital.

The Learning and Growth Perspective covers your people, who should be top-notch Disciplined People capable of creating the intangibles which lead to greateness. Recruiting “the right people” is the most important decision any organisation can make. You would use the principles of Good to Great as you overarching guidelines and norms. You would also use other tried and tested theories for developing the details of your selection, training and reward systems.

Once they are on the bus, place your people in the right seats and determine direction. How will they assist in executing your bank’s strategic plan as expressed in your bank’s mission and vision statements and in its major goals? Every department would have its own mission and vision statements which are aligned to the corporate strategic plan of your bank.  Every department would have its own BSC aligned to the corporate BSC of your bank. Ensure that your appraisal system is linked to your set of  Balanced Scorecards and the results which your people obtain. Every person has a responsibility for achieving some of the bank’s objectives. Is this not so?

Now let’s move over to Internal Business Processes Perspective which concerns your bank.

•    Developing systems or processes such as needed for planning and execution, for handling and delivering great products and services, financial systems, etc., would all fall under Operations Management Processes of this perspective.

•    I place Marketing and PR under Customer Management Processes.  Depending on your strategy, you may have to reposition your bank, redefine your target markets, identify and evaluate your customers, need to inform them anew of your products and services, obtain feedback and develop a new or adapted Customer Management System (CMS).

•    Under Innovation Process you would, among others, house your objectives which concerns R&D and attempts at developing great new products and services, and new markets.

•    Under Regulatory and Social Processes you need to insert objectives aimed at ensuring that you new approach in terms of Good to Great are supportive of state and federal legislative, and social norms. Your bank might wish to support a social responsibility project and put something back into society, if it is not doing so already.

Execution or Disciplined Action is the most important factor after you have appointed Disciplined People, who have Disciplined Thoughts. Many companies that have truly solid strategic and operational plans achieve very little that is new as they fail to execute properly. Disciplined Action means having a strategy of execution and putting into place a series of meetings (annual, monthly and weekly), strategy workshops, innovation sessions, brutally honest discussions, realistic assessments and more. Open your annual calendar and determine what types of meetings need to be in place with which to manage the execution process of the objectives listed under the various headings of the Balanced Scorecard. (Visit execution of plans and related headings on my website.)

A few observations:
•    “Discipline” for many has a negative connotation. Disciplined people quite naturally allocate energy, time, thought and take disciplined action necessary to achieve success – which in itself is very satisfying and financially speaking, sound. Ask any sports team what it means when they stand on the winner’s podium. Or ask Jim Collins. Undisciplined people, you may have noticed, are great at offering lame excuses.

•    If a company sincerely strives to achieve success it might as well decide to go for great. Of course, becoming great requires dedicated, demanding, very hard work and disciplined practice over many years. On the other hand, just consider how much time and energy is wasted daily in average companies in rectifying mistakes and in muddling through. Think of the regrets at the end of a career for not having been more thoughtful and for not having done what Jim Collins suggests could and should be done. It’s simply great to build a truly great organisation. The process is personally empowering and most rewarding. Leave a really worthwhile legacy for your shareholders and employees and especially for the communities which your bank serves.

•   The Balanced Scorecard is a perfect receptacle for ideas. It provides a framework which will oblige you to think of all issues many of  which you may have habitually or traditionally neglected. The key to understanding the BSC is a set of Strategy Maps. (I could send you maps which contain guidelines.) All the perspectives (and your objectives) are linked in a cause and effect manner. The Balanced Scorecard will oblige your team to develop a broad and balanced understanding of what each and the team want to achieve and what each has to do. The BSC is an instrument used for developing a solid strategy. And simultaneously, the compact details of the BSC form a perfect operational plan.

•   Good to Great provides a thoroughly researched approach – which contains ideas which need to be inserted in one’s thinking and doing, in one’s planning and execution. (For a summary, click on Good to Great.)

•    Your bank has embarked upon a huge change process. Heed John P Kotter’s principles of managing change to ensure the acceptance and support of your personnel.

It is great that your bank wishes to use both frameworks as the one enriches and strengthens the other.

And using both will lead to huge results – if they are used thoroughly.

In these changed economic and financial times the great will survive and thrive.

Can any company afford not to go for great?

Albert