Many people interested in the balanced scorecard system (BSC) and practicing this approach are familiar with the methodological thesis of the “classics of the genre”: at the corporate or company level, the BSC should have a limited number of indicators, no more than 15-25, otherwise, if there are more indicators, there will be an inevitable “dispersion” of the company’s resources and efforts, in other words, a fatal “blurring of the strategic focus” will occur…
Of course, one way or another, a company needs a mission, vision, goals, strategy for greater meaningfulness and awareness of its development, and, as a result of awareness, the company can determine its priorities.
On the one hand, the company determines priorities based on a developed or intuitively formed strategy; priorities form its “strategic focus” – a short list of interrelated (ideally, balanced) key indicators.
On the other hand, business is a “multifaceted” system, the health of which cannot be squeezed into 25 indicators, and if a “fire” happens, then, it seems, there is no time for strategy… Multifacetedness is also associated with the need to take into account factors that are beyond the control of even an all-powerful top manager: the market, macro factors (exchange rates, oil, inflation). As a result, priorities can “float” and change dynamically. And if we talk about the “strategic focus” of 25 indicators, then this is no longer a static list of key indicators, but a kind of “kaleidoscope pattern of target indicators”, where there are more than 25 “glass” indicators in general, but each time we see in focus 25 new indicators that are relevant at the time of rotation of the kaleidoscope… This is facilitated by the external and internal “turbulence” of the business, new ideas and wishes of shareholders – all leads to the fact that the previously declared priorities acquire the property of dynamically changing over time… And how in this case to maintain continuity in strategic planning, reporting? To determine whether the previously developed strategy was effective?
Let’s assume that a top manager has his own view of things and has come to the feeling that there are more priority indicators. What can be done in this case? You can generalize the priority indicators and reduce their number to 25 integral indicators – however, the picture may turn out to be “emasculated”, “the average temperature in the hospital” … Or organize corporate training on this topic, which is also not useless …
One way or another, control and management are carried out through indicators and their values - target indicators, process, project, functional, financial and economic, in the context of the organizational hierarchy. A complete list of indicators describes the business in all significant aspects, is reflected in management reporting, and their number is not limited by any formal framework, except for the need of management for analytical support for making management decisions.
If you are “friends” with IT technologies and have the appropriate budget, you can take the most interesting and useful path. All the indicators necessary for a “full-fledged” and complete description of the company’s business are concentrated in one information space. And this unifying space for managers can be a BPM system… For example, in a BPM system you can create a “library” of indicators containing all the necessary indicators used in management reporting, including natural and process indicators.
An example of the structure of the library of indicators is shown in the figure, Figure 1, library of indicators of the internal business environment. The library forms the maximum necessary and complete set of indicators necessary for understanding the state of different areas of the company/corporation business, without quantity restrictions.
Figure 1. Example of the structure of a library of business indicators, internal environment.
The indicators recognized as priority ones are “lifted” from the library “to the top” and “put” into the planning period where they have the status of strategically important indicators, an example is shown in the figure (Figure 2). After “losing” this status, the indicators are excluded from the list of strategic ones, but are saved in the library (Figure 1) and supported by accounting processes, the statistics of actual values continues to accumulate. And at any time, when there is a need to return them to the priority status, they can again be “lifted to the top” (Figure 2) into the strategic plans and strategic reporting of the company.
Figure 2. Strategic indicators of the company
It is recommended to supplement the information space of the internal environment with information about the external environment (macroeconomics, information about competitors, suppliers, – as an example, the information can be structured in terms of PESTEL analysis, Porter’s five forces). An example of the structure of the library of external environment indicators is shown in the figure, Figure 3.
Sometimes it is necessary to correlate your indicators with indicators of the macroenvironment and the market, compare them with indicators of competitors, in connection with which, it is convenient to have data on the external environment in a common information space. This will allow “linking” the forecast and actual values of indicators of the market, competitors, partners with the planned and actual values of indicators of the corporation or company.
Figure 3. Example of the library structure by external environment: macroenvironment and markets of presence.
Thus, a single information space is formed, containing information on all company indicators, and the task of goal-setting based on the BSC methodology becomes simpler and more transparent. The formation of a “strategic focus” occurs in the context of the entire available array of relevant business data and the external environment, which allows dynamic monitoring of the state of strategic priorities.
